special oregon issue law review

ISSUE

1992

SPECIAL

OREGONLAW REVIEW

OFFICIAL COMMENTARY TOTHE REVISED OREGON

NONPROFIT CORPORATION ACT

rI

1992

PlacementThe University of Oregon School of Law Career Planning and Placement Program

invites prospective employers in all areas to use the services of the Placement Office.Third-year students interested in permanent employment and other students interested

in summer employment are available through the Placement Program. In addition, the Program receives inquiries from alumni regarding job opportunities and has students interestedin part-time employment during the school year.

The most satisfactory method of recruitment is personal interviews at the Law School.By coming to the School, a prospective employer is able to meet more students and conductmore adequate interviews. The Law Center provides ample facilities for on-campus interviews. We will be happy to circulate notices of interviews and set up an interview schedule inadvance to meet employers' needs. The Placement Program will also reserve interviewrooms, supply resumes in advance, arrange parking, and make any special arrangements thatmay be required by the employer.

If an employer cannot come to the Law School for interviews, the Placement Programwill be happy to arrange to have interested candidates communicate with the employer. Wealso issue a bulletin of job opportunities bi-weekly to graduates, free of charge.

To arrange interviews, circulate job descriptions, or secure further information about thePlacement Program, please telephone or write Mervyn Loya, Assistant Dean for Administration, or Dina Jian, Placement Coordinator, University of Oregon School of Law, Eugene,Oregon 97403, telephone (503) 346-3847.

SPECIAL

Member of the National Conference of Law Reviews

Subscription $20.00 per annum. Single copies $5.00. Special and symposium issues seton ad hoc basis. Reprints $4.00.Editorial and publication office, School of Law, University of Oregon, Eugene, Oregon97403-1221, U.S.A., telephone (503) 346-3844 (ISSN 0196-2043).POSTMASTER: Send address changes to the Oregon Law Review, University ofOregon Law School, Eugene, OR 97403-122I.Copyright © 1992, University of Oregon.

ISSUE

Joel M. PollackJane ReyerKurt E. ScheuermanShay S. ScottGerald M. Shean IIIBradford L. TannenBrian M. Thompson

Managing EditorsPeter DeAndreisSteven A. MooreMichael T. Stone

Operations EditorRobert E. Willyard

Sabrina M. PetersenAlex I. PoustSandra A. RileyJoyce Sobel

EDITORIAL BOARDEDITOR·IN·CHIEF

S. Andrew Pharies

Special Issue EditorJeffrey A. Montgomery

Associate Editors

OREGONLAW REVIEW

Executive EditorsGlen F. DorganConstance E. Sullivan

Articles EditorsDarquise CloutierGeorge A. Fields

Stephen B. ChanChristine M. CoffeltMark K. ConleyDarien S. LoiselleSean R. Matt

Russell S. AbramstWilliam L. AdamsRaymond L. ChurbaPhilip E. DeAngeliMyra E. HowardBlake HutchinsPaul E. Loving

StaffSean A. LyellWendy M. MargolisKurt M. MaschoffAngela VanOrman MastroniChin See MingBradley MyersJoshua L. PalmertDebra E. Pilcher

Faculty AdvisorsCaroline A. Forell

Ralph James MooneyDominick Vetri

Dave Frohnmayer, Dean

Maxine Lee, Administrative Specialist

t Assistant Special Issue Editor

FACULTY 1991-92Michael D. Axline, B.A., J.D.Steven W. Bender, B.S., J.D.John E. Bonine, A.B., LL.B.Marilyn M. Bradetich, B.A.Donald W. Brodie, B.A., LL.B.Andrea G. Coffman, B.S., M.L.S.Caroline A. Forell, B.A., J.D.David B. Frohnmayer, A.B., B.A., M.A., J.D.Susan N. Gary, B.A., J.D.Ibrahim J. Gassama, B.A., J.D.Jane H. Gordon, A.B., J.D.Leslie J. Harris, B.A., J.D.Richard G. Hildreth, B.S.E., J.D.,

Diploma in Law, Oxford,Diploma in Law, University of Stockholm

Maurice J. Holland, A.B., M.A., J.D., LL.M., Ph.D.Dennis R. Hyatt, B.A., J.D., M.L.L.Jon L. Jacobson, B.A., J.D.Gregory A. Johnson, B.A., J.D.Laird C. Kirkpatrick, A.B., J.D.Mary S. Lawrence, B.A., M.A., J.D.Mervyn H. Loya, B.A., M.A., J.D.Fredric R. Merrill, B.A., J.D.Ralph James Mooney, A.B., J.D.James M. O'Fallon, B.A., M.A., J.D.Charles R. O'Kelley, Jr., A.B., J.D., LL.M.George M. Platt, B.S., LL.B.David Schuman, B.A., Ph.D., J.D.Nancy E. Shurtz, B.A., J.D., LL.M.Peter N. Swan, B.S., LL.B.Dominick R. Vetri, B.S.M.E., J.D.Wayne T. Westling, A.B., J.D.Mary C. Wood, B.A., J.D.

FACULTY EMERITILois I. Baker, B.A., M.S.Frank J. Barry, B.A., LL.B.Chapin D. Clark, A.B., LL.B., LL.M.Orlando John Hollis, B.S., J.D.

Distinguished Professor EmeritusFrank R. Lacy, A.B., J.D., LL.M., J.S.D.William D. Randolph, B.S., J.D.Milton L. Ray, B.A., J.D.Eugene F. Scoles, A.B., J.D., LL.M., J.S.D.

Distinguished Professor Emeritus

TheUniversityof OregonSchool ofLaw

Eugene, Oregon97403

L

NONPROFIT CORPORATION ACT TASK FORCE

p

z

Jeffrey C. Wolfstone, Chair

Vicki Ballou

Roderick Bunnell

Karen Creason

Leonard D. DuBoff

Theodore C. Falk

Mary Ann Frantz

Jack H. Graham

J. Barrett Marks

Robert W. Nunn

William G. Purdy

Roger M. Saydack

Marjory A. Wall

1

Preface

In 1988, the Business Law Section of the Oregon State Bar accepted the challenge of revising Oregon nonprofit corporation law.The Model Nonprofit Corporation Act Task Force was subsequently formed and began work in the Spring of 1988. The TaskForce was primarily comprised of practicing attorneys fromOregon.

During the drafting process, the Task Force relied most heavilyon the American Bar Association's Revised Model Nonprofit Corporation Act. In addition, the' Oregon Task Force incorporatedboth private corporation law (Oregon Revised Statutes Chapter 60)and the former Oregon nonprofit act (Oregon Revised StatutesChapter 61) into their revisions. After enlisting the experiise of theOregon Attorney General's Office and the Oregon Office of Legislative Counsel, the Task Force submitted the revised nonprofit act(Oregon Revised Statutes Chapter 65) to the Oregon legislature.The legislature adopted Oregon Revised Statutes Chapter 65 inMay of 1989.

In December of 1991, the Oregon Law Review agreed to publishthe Official Commentary to the Revised Oregon Nonprofit Corporation Act. At this time, the commentary required some minor editing. The Oregon legislature had made several changes to the billthat the Task Force submitted, rendering certain commentary superfluous or incorrect. Moreover, the Task Force created additional commentary in 1991 to accompany 1991 revisions to OregonRevised Statutes Chapter 65. Consequently, the primary functionof the Oregon Law Review was to update the commentary.

The goal of the Oregon Law Review has been to create a usefulpractice tool for nonprofit lawyers, directors, and participants. Toaccomplish this, the editing team preserved the integrity of the commentary. Once the 1989 commentary was reconciled with the 1989version of Chapter 65, the editing team integrated all 1991 amendments and corresponding commentary. This process resulted in acompletely updated version of the commentary to the Revised Oregon Nonprofit Corporation Act as of the 1991 legislative session.

The Oregon Law Review wishes to thank all those who made thisproject possible. Those organizations and individuals include the

[iii]

iv OREGON LAW REVIEW [Special Issue, 1992]

l

Model Nonprofit Corporation Act Task Force, the Oregon Secretary of State's Office, Jeffrey Wolfstone, Professor Charles O'Kelley,Dean Maurice Holland, and Dean Dave Frohnmayer.

THE MANAGING BOARD

Introduction

This Oregon Commentary has been prepared by the Model Nonprofit Corporation Act Task Force of the Business Law Section ofthe Oregon State Bar. The Task Force drafted the Bill after an extensive review and comparison of the following sources:

(1) The Revised Model Nonprofit Corporation Act, adopted bythe American Bar Association in 1987;

(2) The Oregon Business Corporation Act, based on the RevisedModel Business Corporation Act (1984), as adopted by theOregon Legislative Assembly in 1987 and codified in ORSChapter 60; and

(3) The Oregon Nonprofit Corporation Law as codified in ORSChapter 61, originally enacted by the Oregon Legislative Assembly in 1959 and based on the unrevised Model NonprofitCorporation Act.

This Oregon Commentary compares the Bill section-by-section witheach of these sources. Additional comments are furnished whereapplicable. In most instances, the Bill is based on the Model Act,with revisions to parallel the comparable provisions of the BusinessCorporation Act.

The Model Act is accompanied by Official Comments preparedby the Subcommittee on the Model Nonprofit Corporation Law ofthe Business Law Section, American Bar Association. The OregonCommentary is intended to provide a similar resource for the Bill.Except where the Bill differs from the Model Act, the Official Comments on the Model Act apply to the Bill and are incorporatedherein. This Oregon Commentary, together with the Model ActOfficial Comments, is intended to provide a guide to interpretingthe provisions of the Bill.

[v]

"Bill"

"Model Act"

"Existing Law"

"ORS"

"Commissioner"

"Division"

"BusinessCorporation Act"

"Task Force"

"Chapter 61"

Defined Terms

means House Bill 2278 B-Engrossed asintroduced into the 1989 regular session ofthe Oregon Legislative Assembly, as amendedby Senate Bill 426 as introduced into the1991 regular session of the Oregon LegislativeAssembly.

means the Revised Model NonprofitCorporation Act as adopted by theSubcommittee on the Model NonprofitCorporation Law of the Business LawSection, American Bar Association (summer,1987), in the official text published in 1988 byPrentice Hall Law & Business.

means Oregon law as of January 1, 1989.

means Oregon Revised Statutes, 1991 edition,published by the Legislative CounselCommittee of the Legislative Assembly of theState of Oregon.

means the Oregon CorporationCommissioner.

means the Corporation Division of theOregon Secretary of State.

means ORS Chapter 60.

means the Model Nonprofit Corporation ActTask Force of the Business Law Section ofthe Oregon State Bar.

means ORS Chapter 61, the OregonNonprofit Corporation Law.

[vi]

1

,

I

~

EXECUTIVE SUMMARYOF

PROPOSED REVISED OREGON NONPROFITCORPORATION ACT

The proposed legislation was prepared by a task force of the Business Law Section of the Oregon State Bar. The purpose of the legislation is to replace the current Oregon Nonprofit Corporation Lawset forth in ORS Chapter 61.

There are three principal reasons for proposing the new OregonNonprofit Corporation Act. First, the new legislation will bring theNonprofit Corporation Act into conformity with the Business Corporation Act (ORS Chapter 60), which was overhauled in the 1987Oregon Legislature. This conformity will not only lead to greatercertainty and uniformity in corporation law generally, but it willalso facilitate the administrative functions performed by the office ofthe Secretary of State. Moreover, because the proposed legislationis based on the Revised Model Nonprofit Corporation Act adoptedby the American Bar Association in 1987, over the years the newlegislation should provide a good foundation from which to dealwith new issues as they arise in Oregon and in other jurisdictionsacross the country.

Second, the substance of the proposed legislation addresses anumber of areas that are ambiguous in the current law. Because theproposed legislation better defines the relationships among members, directors, officers and others, those involved with nonprofitcorporations will be better able to plan for and observe their rightsand obligations. Among the areas that the proposed legislation willclarify are corporate purposes, derivative suits, court-ordered meetings, record date for meetings, rights of inspection of membershiplists, and distribution of assets on dissolution. The general approach is to allow substantial flexibility in recognition of the factthat existing nonprofit corporations, as well as those to be formed inthe future, serve a diverse range of needs and objects. A paramountconcern in drafting the new legislation has been to honor the expectations of existing nonprofit corporations.

And third, the proposed legislation is designed to promote "userfriendliness." It is recognized that many nonprofit corporations donot have the resources to retain legal counsel on a regular basis.

vii

The existing law is broad, but does not provide much guidance todeal with the increasingly complex environment faced by today'snonprofit corporations. Thus, while the proposed legislation is relatively lengthy, it provides a better road map for the casual user.This is accomplished both in the structure of the Act as well asthrough the greater detail in which each particular subject isaddressed.

It should be noted that a substantial amount of thought has beengiven to the scope of the proposed legislation. There are many additional issues that might have been addressed, but which were not.For example, it would have been possible to propose significantchanges in the exoneration and indemnification of officers and directors; however, in this regard the task force felt that it was inappropriate to substantially alter the balance established in the 1987 tortreform legislation. By way of further example, the task force couldhave attempted to address the problems of fraud and misrepresentation in the course of charitable solicitations; in this regard, the taskforce determined that it was beyond the scope of corporate law todetermine whether the existing protections are in fact adequate orwhether further legislation is appropriate. The scope is confined tothe issues addressed by the existing Act and the Model Act.

The commentary that follows consists of:

(a) A separate summary for each chapter or group of relatedchapters.

(b) A section-by-section commentary that compares the proposed legislation to the Business Corporation Act, to the existing Nonprofit Corporation Law and to the Model Act.

GENERAL PROVISIONS, ORGANIZATION, PURPOSES AND

POWERS, NAMES, AND OFFICE AND AGENT

The proposed revisions ease some of the unnecessary technicalrequirements of the prior act with respect to the need for a corporate "office," use of duplicate and "true" copies, handling of theorganizational meeting, signatures of all incorporators on documents, and inclusion of director addresses in the articles which arepublic documents. They also provide greater clarity and cues forlay users by such devices as inclusion of a notation that tax considerations may call for voluntary restriction of available corporatepowers and clearer cross-references to statutorily defined termswhich otherwise easily might be misinterpreted. Quorum and no-

viii

tice requirements for membership actions have been eased to reflectthe extensive membership in many nonprofit corporations, and thevaried channels appropriate to communicating most matters tothem are recognized. "Default provisions" have been added to remedy gaps in documents which otherwise cause problems.

Where the substance is the same, the language of parallel provisions in the Business Corporation Act has been used in order tofacilitate use of this chapter by those more familiar with ORS Chapter 60 and to gain the interpretation advantages of that chapter, forwhich more extensive court commentary is available. Immunityprovisions parallel to those authorized by the Business CorporationAct have been added, but extended to cover uncompensated officers. Loans to officers and directors have been explicitly prohibited, however. Wherever practical, the new provisions have beenframed so as to avoid the need for existing corporations to amendtheir articles or bylaws solely because of the proposed statutorychanges.

Inconsistencies in various previously uncoordinated sections(such as in sections concerning presumptions created by filing) havebeen corrected. Prior ambiguities in the definition of "member" forpurposes of acquiring statutory rights and uncertainties in themethod of challenge of disputed acts of the Secretary of State (contested case versus final order under the APA) have been clarified.Deviation by the Secretary of State from literal compliance witharchaic statutory procedures (by elimination of separate certificatesof incorporation and duplicate mailings, for example) have been reflected in the updated statutory provisions. Circular definitionshave been given meaningful content.

Structures unique to the nonprofit context are explicitly recognized and their authorized roles stated (e.g., "members" and "delegates"). Definitions have been expanded to facilitate the proposal'snew tripartite classification system for public benefit corporations,mutual benefit corporations, and religious corporations. Authorization of special emergency powers and bylaws was included to facilitate health and other public benefit group responses in time ofdisaster.

Notice to the Attorney General about crucial events involvingpublic benefit corporations is enhanced and the Attorney Generalhas been given express derivative enforcement powers over public

ix

benefit corporations. Penalties for filing false documents have beenadded, consistent with provisions of the criminal code.

Finally, the requirement that nonprofit corporations not haveany "for-profit" purposes was eliminated based on the conclusionthat state nonprofit corporation status does not, alone, convey taxor other benefits, and that the distribution provisions and AttorneyGeneral powers provide adequate safeguards against abuse.

MEMBERS AND MEMBERSHIPS

A nonprofit corporation need not have members. But if it does,the members (although not owners of the corporation) generallyhave a role in governing the corporation similar to that of stockholders in a business corporation.

The proposed Act accommodates the broad diversity of rightsand duties that various corporations afford their members. Theproposed Act limits the term "member" for purposes of the proposed Act to those persons who can vote on more than one occasionfor the election of a director or directors. The definition recognizesthat some corporations may use the term "member" to describepersons who have no voting rights and thus are not "members"under the proposed Act. The proposed Act authorizes corporationsto have delegates rather than, or in addition to, members.

The proposed Act allows a corporation to establish its own standards for membership, which mayor may not require valuable consideration. A person must consent to being a member; for example,a nonprofit corporation cannot designate all the citizens of Oregonas its members. All members have equal rights, except as the articles or bylaws have established differences.

Memberships in mutual benefit corporations may be freely transferable, but membership in a public benefit or religious corporationmay not be transferred for value (except where the member itself isa public benefit or religious corporation). Similarly, a mutual benefit corporation may acquire for value the membership of an exitingmember, but a public benefit or religious corporation generally maynot do so.

A member may be liable for dues, assessments or fees, but only ifthe member has acquiesced. Like stockholders, members generallyhave no personal liability to third parties for the corporation's obli-

x

gations and are protected from a creditor's action against thecorporation.

A nonprofit organization cannot force a person to belong to it. Amember may resign at any time, although a former member may beliable for obligations incurred prior to resignation. The corporationmay expel or suspend a member or terminate a membership onlythrough a procedure that is fair, reasonable, and in good faith.

The proposed Act authorizes derivative suits on behalf of nonprofit corporations, through a procedure similar to such suits onbehalf of business corporations. The task force concluded that aderivative suit could be brought under current law. The proposedAct clarifies who may bring derivative suits, the requirement of aprior demand on the board, court approval of any settlement ordiscontinuance, award of costs and counsel fees, notice to the Attorney General, and exhaustion of internal remedies.

MEMBERS MEETINGS AND VOTING

The procedures in the proposed Act for membership meetingsgenerally parallel those in the Business Corporation Act for shareholders' meetings.

The proposed Act specifies the procedure for call and notice ofannual, regular and special meetings. Members holding 5% of thevoting power may demand a special meeting. The circuit court mayorder a meeting to be held if the corporation has failed to hold it.

Notice of meetings must be given in a fair and reasonable manner, and the proposed Act provides a safe harbor satisfying this requirement. As under the current nonprofit corporation law, sevendays from mailing is sufficient notice. The proposed Act limits thisseven-day safe harbor to notice by first class or registered mail. Another method of notice - for example by publication, by posting, orby oral announcement - may be fair and reasonable even though itis not within the safe harbor.

The Act applies the concept of record date, which exists in business corporation law, to nonprofit corporations. The record datesare the precise dates for determining the members who are entitledto various rights. This record date statute codifies the way mostnonprofit organizations operate and will apply automatically, unlessthe corporation has its own provisions.

The members' list for a meeting is to contain membership dates,

xi

\1

which will permit determining who the members were as of anyrecord date. As under current law, the list of members must beavailable for inspection for a proper purpose; however, political orsocial action public benefit corporations may limit or abolish therights to inspect and copy by so providing in their articles if theyprovide a reasonable means of mailing commentary to their members. The proposed Act supplies a procedure for resolving disputesover access to the membership list.

The proposed Act defines the vote necessary for approval by themembers, and the proposal allows such approval to be gained inseveral ways in addition to voting in person. Members may actthrough a written consent of all of the members, through proxy voting, through written ballots, or through a conference telephone call.Generally one member will have one vote, but the corporation mayspecify weighted, cumulative, or preferential voting or specify voting by class, chapter, or region. Voting agreements are allowed.

As under current law, there is no minimum quorum for meetingsof members, unless the articles or bylaws impose it. The proposedAct requires certain amendments affecting quorum or voting requirements to be submitted to the members for approval. The proposed Act adds definite standards for acceptance or rejection of amember's vote. Provisions for adjournment are added.

DIRECTORS AND OFFICERS

The proposed Act generally tracks the current statutory provisions regarding directors and officers, although certain changes andclarifications have been made and are described below. Members ofthe board of directors are specifically required to be individuals.The board's power to delegate, and thus be relieved from duties andresponsibilities normally exercised by it, has been broadened. As inother parts of the proposed Act, there is a distinction between corporations with members and those without. Unless a corporationhas members, directors are elected, appointed, or designated as provided in the articles or bylaws, or by the board. Otherwise, themembers of a corporation are entitled to elect the directors exceptto the extent the articles or bylaws provide to the contrary. Unlessdirectors are appointed or designated, there is a five-year limit onthe term of the directors, although a director remains in office untila successor has been named. The term of a director who fills a va-

xii

cancy in the office of a director elected by members expires at thenext election of directors, not at the end of the unexpired term.

Provisions of the proposed statute not previously found in ORSChapter 61 include those discussing director resignation, the removal of directors elected by the board, the removal of appointed ordesignated directors, and the judicial removal of directors. Religious corporations are subject to lesser limitations regarding removal procedures. While the proposed statute offers additionalrights to members and enables the Attorney General to participatein the judicial removal of directors in public benefit corporations,the proposed statute offers more flexibility for religious corporations. The proposal provides a specific mechanism for replacing appointed and designated directors, and the sections regardingvacancies and the effective date of action taken without a meetingare discussed in more detail than under current law. The proposalalso distinguishes between the regular and special meetings of theboard of directors and the notice required for each. The currentstatutory provisions concerning the effect of the attendance of a director at a meeting have been expanded.

Not unlike current law, the proposed Act establishes a minimumquorum of directors. The mechanics of committee creation and operation is discussed with greater specificity. The proposed sectionregarding the general standards of conduct for directors is broaderand more comprehensive than the present provision. The proposedAct contains a conflict of interest section, unlike existing law. Theprovision governing loans to directors and officers is expanded toinclude guarantees. Provisions concerning directors' liability forunlawful distributions are also new.

A section has been added describing the duties of officers. TheAct sets forth a standard of conduct for officers that parallels thestandard applicable to directors. The provision governing the removal of an officer is expanded to include a discussion of the resignation of an officer. The proposal emphasizes that the mereappointment of an officer does not create contractual rights and thatthe officer's removal or resignation does not affect the parties' contractual rights.

Definitions specifically applicable to the indemnification subchapter have been included. The provision regarding mandatory indemnification requires that a director be wholly successful, eitheron the merits or otherwise. Furthermore, the director will be re-

xiii

quired to provide a written affirmation concerning the director'sconduct. Standards for court ordered indemnification, not found inthe existing statute, have been added. The proposal also contains aseparate section governing the indemnification of officers, employees, and agents.

AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS

This proposal adds useful clarification and a few new provisionsto existing law.

Under this proposed Act, the board of directors may adopt certain routine or nonsubstantive amendments to the articles withoutapproval of members or any other third person, where the changesdo not adversely affect members' rights. A corporation may, however, elect by a provision in its articles not to allow amendment ofarticles without member approval. One new provision also allowsamendment of articles by incorporators prior to the choosing ofdirectors.

The general rule is still that the board and the members mustapprove amendment of articles. A corporation may also require approval of article amendments by specified third persons. This givesgreater flexibility. It permits a nonprofit "subsidiary," for example,to have its article amendments subject to the veto of its "parent,"without the parent being the sole member of the subsidiary.

The proposed Act introduces new provisions to allow the boardor the members to increase the vote required to amend articles, requires board approval for certain article amendments for publicbenefit or religious corporations, and permits approval by either theboard or the members to be conditional. If there are differentclasses of members, detailed rules for class voting are provided. Articles may be amended by a court to carry out a plan ofreorganization.

Restated articles may be adopted without approval of membersor any specified third party, where they consist of amendments previously approved by members or such third party.

Where a board has the power to amend bylaws, this chapter provides for the notice of the meeting to contain more detailed information than provided under current law. The board has sole powerto amend bylaws unless the articles or the Nonprofit CorporationAct reserve the power to the members, or to a specified third party,

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in whole or in part. Members may amend bylaws even though theboard may also amend them. Members can also prevent the boardfrom amending any particular bylaw that the members amend orrepeal.

MERGER

The key difference between the proposed Act and existing ORSChapter 61 provisions is that the proposal permits a nonprofit corporation to merge with a business corporation, with certain restrictions where a public benefit or religious corporation is involved.This authority would significantly reduce the logistical requirements to consummating legitimate transactions which currently canbe achieved only through a series of mergers following multiple incorporations, both foreign and domestic, or through similarly indirect and illogical procedures to reach the desired goal. Theproposed Act contains restrictions which are ample to protectagainst abuse where the public interest is involved.

The proposed Act also has the advantage of being generally parallel to the comparable provisions of ORS Chapter 60. The presentation is somewhat clearer, better organized, and more concise thanexisting ORS Chapter 61.

Finally, the proposed Act contains a specific provision on the effect of a merger on bequests, devises and gifts, which may serve as auseful reminder to persons contemplating such a merger.

SALE OF ASSETS

The proposed Act is comparable to existing ORS Chapter 61with respect to a sale of all or substantially all of a corporation'sassets outside the regular course of activities, which requires member approval. Unlike ORS Chapter 61, however, the proposal doesnot require member approval of sales of all, or substantially all, of acorporation's assets in the ordinary course of its activities or mortgages of such assets. This will significantly lessen the proceduralburden placed on nonprofit corporations involved in such commonactivities as buying a piece of equipment (which may represent virtually all of its assets) on an installment sale basis. Corporationsthat wish to retain a member approval requirement may includesuch a provision in their articles of incorporation.

The proposed Act is generally parallel to the comparable provi-

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and repeal provisions required to give orderly effect to the proposedlegislation.

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Oregon Revised Statutes Chapter 65

1991 EDITION

Nonprofit Corporations

GENERAL PROVISIONS

(Definitions)

65.001 Definitions .

(Filing Documents)

65.004 Filing requirements . . . . . . . . . . . . . . . . . . . . . . . 1065.007 Filing, service and copying fees. . 1265.011 Effective time and date of document........ . 1365.014 Correcting filed document.. .. 1465.016 Forms........................................... 1665.017 Filing duty of Secretary of State.................. 1765.021 Appeal from Secretary of State's refusal to file

document........................................ 1865.024 Evidentiary effect of certified copy of filed

document or secretary's certificate. . . . . . . . . . . . . . . . 1965.027 Certificate of existence or authorization..... .... . . 21

(Secretary of State)

65.031 Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

(Notice)

65.034 Notice........ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

(Private Foundations)

65.036 Private foundations ..... . . . . . . . . . . . . . . . . . . . . . . . . . 26

(Judicial Relief)

65.038 Judicial relief.. .. .. .. .. .. . . .. .. .. . .. .. . . . .. . . .. .. 26

(Attorney General)

65.040 Notice to Attorney General; effect of failure tonotify........................................... 28

(Religious Corporations)65.042 Religious Corporations; constitutiunal protections. 29

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INCORPORATION

65.044 Incorporators... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3065.047 Articles of incorporation......... .. . 3065.051 Incorporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3565.054 Liability for preincorporation transactions.. . ..... 3665.057 Organization of corporation. . . . . . . . . . . . . . . . . . . . . . 3765.061 Bylaws.......................................... 3865.064 Emergency bylaws and powers 3965.067 Corporation sole. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

PURPOSES AND POWERS

65.074 Purposes........................................ 4165.077 General powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4365.081 Emergency powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4665.084 Challenge of corporate authority; remedy... 48

NAME

65.094 Corporate name 4965.097 Reserved name.................................. 5165.101 Registered name.... . . 52

OFFICE AND AGENT

65.111 Registered office and registered agent. . . . . . . . . . . . . 5365.114 Change of registered office or registered agent. . . . . 5465.117 Resignation of registered agent. . . . . . . . . . . . . . . . . . . 5565.121 Service on the corporation 57


(Admission of Members)

65.131 Admission....................................... 5865.134 Consideration.................................... 5865.137 No requirement for members. . . . . . . . . . . . . . . . . . . . . 59

(Members' Rights and Obligations)

65.144 Differences in rights and obligations of members.. 5965.147 Transfers........................................ 6065.151 Member's liability to third parties 6365.154 Member's liability for dues, assessments and fees. . 6365.157 Creditor's action against member. . . . . . . . . . . . . . . . . 64

(Resignation and Termination)

65.164 Resignation...................................... 6565.167 Termination, expulsion or suspension. . . . . . . . . . . . . 66

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65.171 Acquiring memberships.......................... 67

(Derivative Suits)

65.174 Derivative suits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

(Delegates)

65.177 Delegates........................................ 71


(Meetings and Action Without Meetings)

65.201 Annual and regular meetings. . . . . . . . . . . . . . . . . . . . . 7265.204 Special meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7365.207 Court-ordered meeting.... 7565.211 Action without meeting.......................... 7665.214 Notice of meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7765.217 Waiver of notice................................. 7965.221 Record date.... . . .. 8065.222 Action by written ballot.. .. . .. .. .. . .. .. .. .. .. .. .. 82

(Voting)

65.224 Members' list for meeting.... . .. 8365.227 Voting entitlement of members...... . 8565.231 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8665.234 Adjournment.................................... 8765.237 Corporation's acceptance of votes. . . . . . . . . . . . . . . . . 8865.241 Quorum requirements............................ 8965.244 Voting requirements 9065.247 Cumulative voting for directors................... 9165.251 Other methods of electing directors. . . . . . . . . . . . . . . 92

(Voting Agreements)

65.254 Voting agreements.... . . 92


(Board of Directors)

65.301 Requirement for and duties of board 9365.304 Qualifications of directors...... .. 9465.307 Number of directors............................. 9465.311 Election, designation and appointment of directors 9565.314 Terms of directors generally. . . . . . . . . . . . . . . . . . . . . . 9665.317 Staggered terms for directors. . . . . . . . . . . . . . . . . . . . . 9765.321 Resignation of directors.... . ..... . .... . . ... . .... . 97

[xxi]

...

65.324 Removal of directors elected by members or AMENDMENT OF ARTICLES OF INCORPORATIONdirectors ......................................... 98 AND BYLAWS

65.327 Removal of directors by judicial proceeding ....... 99 (Amendment of Articles of Incorporation)65.331 Removal of designated or appointed directors ..... 101 12865.334 Vacancy on board ............................... 101 65.431 Authority .......................................65.335 Compensation of directors ........................ 102 65.434 Amendment by directors ......................... 129

65.437 Amendment by board of directors and members .. 131(Meetings and Action of Board) 65.441 Class voting by members on amendments ......... 133

65.337 Regular and special meetings ..................... 103 65.447 Articles of amendment ........................... 13465.341 Action without meeting .......................... 103 65.451 Restated articles of incorporation ................. 13565.344 Call and notice of meetings ...................... 104 65.454 Amendment pursuant to court order.............. 13765.347 Waiver of notice ................................. 105 65.457 Effect of amendment and restatement ............. 13965.351 Quorum and voting .............................. 105 (Amendment of Bylaws)65.354 Committees ...................................... 107

Amendment by directors ......................... 13965.461(Standards of Conduct) 65.464 Amendment by directors and members ........... 141

65.357 General standards for directors ................... 108 65.467 Approval by third persons ....................... 14265.361 Director conflict of interest ....................... 110 MERGER65.364 Loans to or guarantees for directors and officers .. 112

Approval of plan of merger ...................... 14365.367 Liability for unlawful distributions ................ 113 65.481

65.369 Liability of qualified directors .................... 114 65.484 Limitations on mergers by public benefit orreligious corporations ............................ 144

(Officers) 65.487 Action on plan by board, members and third65.371 Required officers ................................. 116 persons ................................... ······ . 14665.374 Duties and authority of officers ................... 117 65.491 Articles of merger ............................... 14865.377 Standards of conduct for officers .................. 117 65.494 Effect of merger ................................. 15065.381 Resignation and removal of officers ............... 118 65.497 Merger with foreign corporation .................. 15165.384 Contract rights of officers ........................ 119 65.501 Effect of merger on bequests, devises and gifts .... 152

(Indemnification) 65.504 Merger with business corporation ................. 152

65.387 Definitions for ORS 65.387 to 65.414 ............. 120 SALE OF ASSETS

65.391 Authority to indemnify .......................... 121 65.531 Sale of assets in regular course of activities;65.394 Mandatory indemnification ....................... 122 mortgage of assets ............................... 15365.397 Advance for expenses ............................ 122 65.534 Sale of assets other than in regular course of65.401 Court-ordered indemnification .................... 123 activities ......................................... 15465.404 Determination and authorization of indemnification 124 DISTRIBUTIONS65.407 Indemnification of officers, employees and agents .. 125

Prohibited distributions .......................... 15665.411 Insurance ........................................ 126 65.551

65.414 Application of ORS 65.387 to 65.411 ............. 126 65.554 Authorized distributions ......................... 156

DISSOLUTION

(Voluntary Dissolution)

65.621 Dissolution by incorporators ..................... 157

[xxii] [xxiii]

65.624 Dissolution by directors, members and third (Withdrawal)persons .......................................... 159 65.734 Withdrawal of foreign corporation .......... -...... 187

65.627 Notices to Attorney General ..................... 160(Administrative Revocation of Authority)65.631 Articles of diss<.'>lution ............................ 161

65.634 Revocation of dissolution ......................... 162 65.737 Grounds for administrative revocation ............ 18865.637 Effect of dissolution .............................. 164 65.741 Procedure for and effect of administrative65.641 Known claims against dissolved corporation ...... 165 revocation ....................................... 18965.644 Unknown claims against dissolved corporation .... 167 65.744 Appeal from administrative revocation ............ 191

(Administrative Dissolution) 65.747 Reinstatement following administrative dissolution 192

65.647 Grounds for administrative dissolution ............ 168 (Judicial Revocation of Authority)65.651 Procedure for and effect of administrative 65.751 Grounds for judicial revocation ................... 192

dissolution ....................................... 169 65.754 Procedure for judicial revocation of authority ..... 19665.654 Reinstatement following administrative dissolution 170 65.757 Decree of revocation ............................. 19665.657 Appeal from denial of reinstatement .............. 171

RECORDS AND REPORTS(Judicial Dissolution)

(Records)65.661 Grounds for judicial dissolution .................. 172

65.771 Corporate records ................................ 19765.664 Procedure for judicial dissolution ................. 17365.774 Inspection of records by members ................ 19965.667 Receivership or custodianship .................... 17465.777 Scope of inspection right ......................... 20165.671 Decree of dissolution ............................. 17565.781 Court-ordered inspection ......................... 201

(Disposition of Assets) 65.782 Limitations on use of membership list ............ 20265.674 Deposit with Division of State Lands ............. 176 (Reports)

FOREIGN CORPORATIONS 65.784 Report to members and other persons of(Authority to Transact Business) indemnification .................................. 203

65.701 Authority to transact business required ........... 177 65.787 Annual report ................................... 204

65.704 Consequences of transacting business without MISCELLANEOUSauthority ........................................ 178 65.951 Short title ....................................... 206

65.707 Application for authority to transact business ..... 180 65.954 Reservation of power to amend or repeal ......... 20665.711 Amendment to application for authority .......... 181 65.957 Application to existing domestic corporations ..... 20765.714 Effect of authority ............................... 182 65.961 Application to qualified foreign corporations ...... 20865.717 Corporate name of foreign corporation ........... 182 65.964 Saving provisions ................................ 20965.721 Registered office and registered agent of foreign 65.967 Severability ...................................... 210

corporation ...................................... 184PENALTY65.724 Change of registered office or registered agent of

foreign corporation 184 65.990 Penalty for signing false document ................ 210..............................65.727 Resignation of registered agent of foreign

corporation ...................................... 18565.731 Service on foreign corporation .................... 186

[xxiv] [xxv]

ORS 65.001

GENERAL PROVISIONS

(DEFINITIONS)

65.001 DEFINITIONS

As used in this chapter, unless otherwise specifically provided:(1) "Anniversary" means that day each year exactly one or more

years after the date of filing by the Office of the Secretary of Stateof the articles of incorporation in the case of a domestic corporationor the date of filing by the Office of the Secretary of State of anapplication for authority to transact business in the case of a foreign corporation. An event which would otherwise cause an anniversary to fallon February 29 shall be deemed to have occurred onFebruary 28.

(2) "Approved by the members" or "approval by the members"means approved or ratified by the members entitled to vote on theissue through either:

(a) The affirmative vote of a majority of the votes of such members represented and voting at a duly held meeting at which a quorum is present or the affirmative vote of such greater proportionincluding the votes of any required proportion of the members ofany class as the articles, bylaws or this chapter may provide forspecified types of member action; or

(b) A written ballot or written consent in conformity with thischapter.

(3) "Articles of incorporation" or "articles" include amendedand restated articles of incorporation and articles of merger, andcorrections thereto.

(4) "Board" or "board of directors" means the individual or individuals vested with overall management of the affairs of the domestic or foreign corporation, irrespective of the name by which theindividual or individuals are designated, except that no individualor group of individuals are the board of directors because of powersdelegated to that individual or group pursuant to ORS 65.301.

(5) "Bylaws" means the code or codes of rules, other than thearticles adopted pursuant to this chapter or the laws governing aforeign corporation for the regulation or management of the affairsof the domestic or foreign corporation, irrespective of the name ornames by which such rules are designated.

(6) "Class" means a group of memberships which have the same

l

ORS 65.001

rights with respect to voting, dissolution, redemption and transfer.For the purpose of this section, rights shall be considered the sameif they are determined by a formula applied uniformly.

(7) "Contact address" means a mailing address at which a personaffiliated with the organization will receive and transmit to the organization notices intended for the foreign or domestic corporationwhen it is either not practical to send such notices to the registeredagent, or a duplicate notice is desirable. The contact address may bethe principal place of business, if any, or the business or residenceaddress of any person associated with the corporation or foreigncorporation who has consented to serve, but shall not be the addressof the registered agent.

(8) "Corporation" or "domestic corporation" means a nonprofitcorporation which is not a foreign corporation, which is incorporated under or subject to the provisions of this chapter.

(9) "Delegates" means those persons elected or appointed to votein a representative assembly for the election of a director or directors or on other matters.

(10) "Deliver" includes mail.(11) "Directors" means individuals designated in the articles or

bylaws or elected by the incorporators to act as members of theboard, and their successors.

(12) "Distribution" means the payment of a dividend or any partof the income or profit of a corporation to its members, directors orofficers, and does not include payment of value for property received or services performed or payment of benefits in furtheranceof the corporation's purposes.

(13) "Effective date of notice" has the meaning given that termin ORS 65.034.

(14) "Employee" does not include an officer or director who isnot employed by the corporation with compensation for services beyond those encompassed by board membership.

(15) "Entity" includes a corporation, foreign corporation, business corporation and foreign business corporation, profit and nonprofit unincorporated association, corporation sole, business trust,estate, partnership, trust, two or more persons having a joint orcommon economic interest, any state, the United States and anyforeign government.

2

ORS 65.001

(16) "File," "filed" or "filing" means reviewed, accepted and entered in the Office of the Secretary of State.

(17) "Foreign corporation" means a corporation organized undera law other than the law of this state which would be a nonprofitcorporation if formed under the laws of this state.

(18) "Governmental subdivision" includes an authority, county,district and municipality.

(19) "Includes" denotes a partial definition.(20) "Individual" means a natural person and includes the guard

ian of an incompetent individual.(21) "Means" denotes an exhaustive definition.(22)(a) "Member" means any person or persons entitled, pursu

ant to a domestic or foreign corporation's articles or bylaws, without regard to what a person is called in the articles or bylaws, tovote on more than one occasion for the election of a director ordirectors.

(b) A person is not a member by virtue of any of the followingrights the person has:

(A) As a delegate;(8) To designate or appoint a director or directors;(C) As a director; or(D) As a holder of an evidence of indebtedness issued or to be

issued by the corporation.(c) Notwithstanding the provisions of paragraph (a) of this sub

section, a person is not a member if the person's membership rightshave been eliminated as provided in ORS 65.164 or 65.167.

(23) "Membership" refers to the rights and obligations a member or members, as defined in this chapter, have pursuant to thischapter.

(24) "Mutual benefit corporation" means a domestic corporationwhich either is formed as a mutual benefit corporation pursuant toORS 65.044 to 65.067, is designated a mutual benefit corporationby a statute or does not come within the definition of public benefitor religious corporation.

(25) "Nonprofit corporation" means mutual benefit corporations,public benefit corporations and religious corporations.

(26) "Notice" has the meaning given that term in ORS 65.034.(27) "Office" when used to refer to the administrative unit di-

3

ORS 65.00}

rected by the Secretary of State, means the Office of the Secretaryof State.

(28) "Person" includes any individual or entity.(29) "Principal office" means the place, in or out of this state, so

designated in the most recent annual report filed pursuant to ORS65.787 or if no annual report is on file, as designated in the articlesof incorporation, or the application for authority to transact business in this state, which shall be the place where the principal executive offices of a domestic or foreign corporation are located, or ifnone, the contact address.

(30) "Proceeding" includes civil, criminal, administrative and investigatory action.

(31) "Public benefit corporation" means a domestic corporationwhich:

(a) Is formed as a public benefit corporation pursuant to ORS65.044 to 65.067, is designated as a public benefit corporation by astatute, is recognized as tax exempt under section 501 (c) (3) of theInternal Revenue Code of 1986 or is otherwise organized for a public or charitable purpose;

(b) Is restricted so that on dissolution it must distribute its assetsto an organization organized for a public or charitable purpose, areligious corporation, the United States, a state or a person which isrecognized as exempt under section 501 (c) (3) of the Internal Revenue Code of 1986; and

(c) Does not come within the definition of "religiouscorporation."

(32) "Record date" means the date established under ORS65.131 to 65.177 or 65.201 to 65.254 on which a corporation determines the identity of its members and their membership rights forthe purposes of this chapter. The determinations shall be made as ofthe time of close of transactions on the record date unless anothertime for doing so is specified at the time the record date is fixed.

(33) "Religious corporation" means a domestic corporationwhich is formed as a religious corporation pursuant to ORS 65.044to 65.067, is designated a religious corporation by a statute or isorganized primarily or exclusively for religious purposes.

(34) "Secretary," when used in the context of a corporate official, means the corporate officer to whom the board of directors hasdelegated responsibility under ORS 65.371 for preparing the min-

4

ORS 65.00}

utes of the directors' and members' meetings and for authenticatingthe records of the corporation.

(35) "State" when referring to a part of the United States, includes a state, commonwealth, territory and insular possession ofthe United States and its agencies and governmental subdivisions.

(36) "Uncompensated officer" means an individual who serves inan office without compensation for personal service. Payment solelyfor actual expenses in performing duties of the officer or a stipendwhich is paid only to compensate the average expenses incurredover the course of a year shall not be deemed to be compensation.

(37) "United States" includes district, authority, bureau, commission, department and any other agency of the United States.

(38) "Vote" includes authorization by written ballot and writtenconsent, where permitted.

(39) "Voting power" means the total number of votes entitled tobe cast on the issue at the time the determination of voting power ismade, excluding a vote which is contingent upon the happening of acondition or event which has not occurred at the time. Where aclass is entitled to vote as a class for directors, the determination ofvoting power of the class shall be based on the percentage of thenumber of directors the class is entitled to elect out of the totalnumber of authorized directors. [1989 c.l0l0 § 14; 1991 c.231 § 1]

OFFICIAL COMMENT To ORS 65.001 (MODEL ACT § 1.40)

(1) Proposed Changes to the Model Act: Specific language ofnumerous Model Act definitions has been conformed to ORS Chapter60, without substantive change except as noted. Additional definitions have been added from ORS Chapter 60 for "anniversary" and"office," since those terms are used in sections revised to conform toChapter 60, and "nonprofit corporation" (which is used elsewherein the statutes) is defined.

Several changes are made in the Model Act's definition of "approved by the members." First, consistent with the authority of thecorporation to vary members' voting rights under ORS 65.144,Model Act § 6.10, the definition refers only to those members withpower to vote on the particular transaction. Second, subdivisionsare introduced for clarity. Third, the parenthetical clause referringto supermajority requirements is moved to a more logical place.Fourth, the Model Act's requirement that effective action can only

5

ORS 65.001

be taken by vote which is both a majority of those voting and amajority of a quorum was rejected. (In many nonprofit organizations membership is freely bestowed on contributors, many ofwhom attend only to vote on some specific issue of interest. Requiring a majority of a quorum for any action at a meeting would frequently stalemate such organizations.)

The definition of "articles" has been expanded to include corrections thereto.

The Model Act's circular definition of "board" has been corrected, and as revised, allows a one-person board (other than forpublic benefit corporations), consistent with ORS 65.307 and ORS61.011(3).

"Corporation" has been redefined to exclude foreign corporations, since they do not follow all the internal operational rules ofthis state.

A new concept of "contact address" has been introduced to facilitate communication when no registered agent has been appointed,or if appointed, has resigned. It is intended to deal with the Corporation Division's inability to use the principal business address (astraditionally defined) in that circumstance since nonprofit corporations frequently lack a real business address. The definition of contact address is accordingly included in the definition of "principaloffice." (See the effect in ORS 65.117(2».

"Distribution" has been redefined to include any transfer at anytime to an officer, director or member if it is not in exchange forreasonable value for property or services received.

The definition of "distribution" is expanded by the addition oftwo provisions drawn from the commentary to the Model Act:namely that the term does not include compensation for servicesrendered or benefits conferred to further the corporation's purpose.It is further expanded by a third provision not found in the commentary: that compensation for property received by the corporation is not a "distribution."

The definition of "employee" is clarified, since the present ModelAct definition (those who are employed) is circular.

The definition of "file" has been altered at the request of the Corporation Division to reflect the proposal's rejection of the ModelAct concept of documents as effective on delivery. (See comment toORS 65.051, Model Act § 2.03.)

6

ORS 65.001

The Model Act definition of "individual" has been completed toinclude the principal group intended.

The Model Act's definition of "member," although more restrictive than current Oregon law, was substantially retained in order toremedy prior ambiguity concerning what characteristics entitled aperson to the statutory rights of "members." ORS 65.ool(b)(B)adds the obviously intended result that power to appoint one ormore directors does not, by itself, accord a person membershiprights. ORS 65.ool(22)(c) adds a reminder that membership rightscan be eliminated by following the procedures spelled out elsewherein the proposal.

The definition of "pUblic benefit corporation" is reorganized forclarity and includes the criteria in Model Act § 17.07(3) and (4).Distribution to a religious corporation is permitted on dissolution.The definition includes all organizations exempt under section50l(c)(3) but also may include organizations that are exempt underother provisions, because some charitable organizations fail to qualify as 50l(c)(3)'s because of lobbying activities.

"Record date" has been clarified to include changes proposed forORS 60.001(18) by including a time reference and making explicitthe duty to compile the list according to relevant rights of members.

The context for the definition of "secretary" has also been clarified to avoid confusion with references to the Secretary of State.

A new definition of uncompensated officer has been added to facilitate immunity provisions. See ORS 65.047(2)(c); see also ORS65.369(4).

The Model Act's definitions of the three categories of nonprofitcorporation (mutual benefit, public benefit, and religious) have beenmodified to directly incorporate material that the Model Act expresses through cross reference to Model Act Chapter 17.

(2) Effective Changes from Chapter 61 Provisions: Lead-in language has been added in recognition that some terms are given special definitions for purposes of limited sections.

Definitions for the three new categories of nonprofit corporationare added, as are definitions for "approved by members," "class,""contact address" (see comment 1), "delegates," "deliver," "directors," "distribution," "effective date of notice," "employee," "entity," "file," "governmental subdivision," "includes," "individual,""means," "membership," "notice," "office," "person," "principal

7

DRS 65.001

office," "proceeding," "record date," "secretary," "state," "uncompensated officer," "United States," "vote," and "voting power."

The definition of "approval by" adds less restrictive requirementsfor membership votes. ORS 61.115 presently provides that a vote ofa majority of the votes present and entitled to vote (but not necessarily actually voting) constitutes effective action if a quorum ispresent; there is no provision for requiring a supermajority. Theportion of the Model Act provisions calculating majority on thoseactually voting was accepted as preferable to avoid allowing abstentions to preclude action. See also discussion in (1) supra regardingchanges in the definition of "member" for purposes of statutoryrights.

The definition of "articles" is expanded to include corrections.The definition of "bylaws" is restated to exclude the articles to conform to common expectation.

The definition of "foreign corporation" has been expanded toreach entities which would be classified as nonprofit corporations inthis state, regardless of how they are classified in their home states.

Under current law, the concept of "members" is somewhat confused. Directors of corporations with members are not necessarilyelected by the members. See ORS 61.111 ("where directors ... areto be elected by members ...."), 61.127(1) ("the members entitledto vote at an election of directors"), 61.111(3). Although ORS61.091 states that any voting rights of members must be specified inthe articles of incorporation, existing law does not clarify what thefunction of nonvoting members is intended to be nor whether onecan be a member if he has certain voting rights but lacks the powerto elect the board of directors. In addition, colloquially and in corporate documents, the term "member" may be used to designatepersons with widely varying relationships to the organization including groups as large as all participants in a religious order, alllocal business interests, all local community members, all cash contributors, or all service providers. Under existing law, all appear tohave some protections if their organization chooses to designatethem as some form of members. The proposed statutory definitionof "member" is more precise by limiting the term "member" forpurposes of gaining the benefits of the Act to those persons who canvote for a director or directors on more than one occasion. Theexclusion of those who vote on only one occasion or who have only

8

DRS 65.001

a right to designate or appoint (but not vote for) directors is intended to prevent membership protections and rights from accruingto delegates and those who act in ex officio, not personal capacities.

"Nonprofit corporation" has been redefined to accommodate theModel Act's tripartite structure.

(3) Relationship to the Oregon Business Corporation Act: Thelead-in language has been modified in recognition that some termshave special definitions for purposes of stated sections only.

The ORS 60.001(2) definition of "articles" does not include corrections thereof.

A potential leap-year problem in ORS 60.oo1(1)'s definition of"anniversary" has also been corrected by treating February 29events as if they occurred on February 28.

The definition of "distribution" in this proposal also differs fromthat in ORS Chapter 60, which does not encompass transfers todirectors, officers, and members and only limits transfer "in respectof any of its shares"-a concept inapplicable in this Act. The Business Corporation Act also automatically assumes officers are employees, but not directors; the Nonprofit proposal does not includethem as employees unless they are compensated for non-board duties, because in nonprofit corporations officers are often unpaid volunteers; they often also make up the board.

The term "corporation sole" which is in this proposal is not explicitly included in the definition of "entity" in Chapter 60, but wasadded in the proposal for clarity.

The cross reference in the proposed definition of "individual" tothe guardian of an incompetent is also not found in ORS60.001(12), presumably an oversight.

Proposals for technical correction ofORS 60.001(18) concerning"record date" are picked up in this proposal.

The concept of "voting power" is used in the proposal in lieu ofthe Business Corporation Act's concept of "voting group."

New definitions, not found in the Business Corporation Act, havebeen added for "approval by members," "board," "bylaws,""class," "contact address," "delegates," "deliver," directors," "effective date of notice," "file," "member," "membership," "mutualbenefit corporation," "notice," public benefit corporation," "religious corporation," "secretary," "uncompensated officer," and"vote."

9

ORS 65.004

OFFICIAL COMMENT TO 1991 LEGISLATIVE AMENDMENT

The changes in (22)(a) are designed to avoid circularity and tolimit the defining characteristic of members to their right to vote onelection of directors. This definition is similar to the Model Act.Corresponding changes are made to ORS 65.227(1), below. The addition to (22)(b), derived from the California statute, clarifies thatone does not become a member merely by virtue of rights as alender.

(FILING DOCUMENTS)

65.004 FILING REQUIREMENTS

(1) A document must satisfy the requirements of this section, except as any other provision of this chapter modifies these requirements, to be entitled to filing by the Secretary of State underauthority of this chapter.

(2) The document must be one required or permitted to be filedin the Office of the Secretary of State.

(3) The document shall contain the information required by thischapter. It may contain other information as well.

(4) The document must be legible.(5) The document must be written in the alphabet used to write

the English language, but may include Arabic or Roman numeralsand incidental punctuation. The certificate of existence required offoreign corporations need not be in English if accompanied by areasonably authenticated English translation.

(6) The document must be executed:(a) Bya fiduciary, receiver or trustee, if the corporation is in the

hands of a receiver, trustee or other court-appointed fiduciary;(b) By an incorporator, if directors have not been selected or its

execution is before the organizational meeting;(c) By the person specified in any section of this chapter that

required the document be filed; or(d) By the chairman of the board of directors of a domestic or

foreign corporation, its president or otherwise by another of itsofficers.

(7) The document shall state beneath or opposite the signaturethe name of the person and the capacity in which the person signs.The document may, but is not required to, contain:

10

ORS 65.004

(a) The corporate seal;(b) An attestation by the secretary or an assistant secretary; or(c) An acknowledgment, verification or proof.(8) If the Secretary of State has prescribed a mandatory form for

a document under ORS 65.016, the document must be in or on theprescribed form.

(9) The document must be delivered to the Office of the Secretary of State for filing and must be accompanied by one exact orconformed copy, except as provided in ORS 65.114, 65.671, 65.674,65.724 and 65.787, and the correct filing fee.

(10) A document is deemed filed or effective only as provided inORS 56.080, 65.001, 65.011, 65.014 and 65.017.


(1) Proposed Changes to the Model Act: Numerous changes inwording have been made to conform the Model Act to ORS Chapter 60. In addition, semantic changes are proposed for subsection(1) to recognize that the stated restrictions are not intended to preclude the Secretary's action in accordance with other relevant authority that might be granted outside this Act. The wording ofsubsection (5) has also been conformed to relevant language fromORS 65.094 (concerning the use of English language in statement ofthe corporate name). The proposal deviates from the language ofboth the Model Act and ORS 60.004(2) by deleting the explicit requirement that "This Act must require or permit filing," in order toavoid any possible inference that there must be an explicit mentionof the document by title for it to be eligible to be filed.

The Model Act also requires all documents to be typed orprinted; both ORS Chapters 60 and 61 presently permit use of legible handwritten documents. The flexibility of the existing provisions was retained in light of the many documents that consist ofsimply complete forms.

A new subsection (10) has been added at the request of the Corporation Division to solve a circular definition of "filed" in theModel Act and to make it clear that a document is not legally"filed" by mere deposit with the Division but rather is "filed" onlywhen it has been reviewed and accepted for filing by the Division.

Both Chapters 60 and 61 presently contain an additional paragraph in this section concerning what is effective "delivery." Since

11

13

(2) The Secretary of State shall collect a fee of $20 each timeprocess is served on the Secretary of State under this chapter.

(3) The Secretary of State by rule may establish fees, in additionto those provided in subsections (1) and (2) of this section, for:

(a) Copying any public record maintained by the Office of Secretary of State and relating to a domestic or foreign corporation, andfor certifying the copy.

(b) Certifying to facts of record, pursuant to ORS 65.027. [1989c.1010 §§ 5, 5a; 1991 c.132 § 5]

$10

$10

$10

$10

$10

ORS 65.007

G) Mergers

(k) Dissolutions and withdrawals

(L) Change of registered agent or office

(m) Registered agent resignations

(n) Correction of annual report


(1) Proposed Changes to the Model Act: The Model Act language has been rejected in favor of conformity to existing ORSChapter 60, resulting in the deletion of many Model Act fees formany documents, including the Model Act's "catchall" fee. (Theuse of Chapter 60 language allows fees for other kinds of copyingand certifying to be set by rule rather than the statute.)

(2) Effective Changes from Chapter 61 Provisions: The additionof fees for: reinstatement following administrative dissolution,amendments to articles of incorporation, restated articles of incorporation, and mergers and share exchanges. The words "application for" before "certificate of existence" were deleted.

(3) Relationship to the Oregon Business Corporation Act: Proposed provisions are parallel to ORS 60.007 except that the fees forfiling articles, applications of foreign corporations for authority todo business, and annual reports are lower for nonprofits (as they arein existing law), and item (d) (concerning reinstatement) is not expressly limited to domestic corporations, as is the parallel provisionin ORS 60.007. The fee levels included in this section are thoserecommended by the Corporation Division. The Task Force expresses no position on their appropriateness.

Document Fee

(a) Articles of incorporation $20(b) Application for reserved name $10(c) Application for registered name $100(d) Application for reinstatement following

administrative dissolution $20(e) Application of a foreign corporation for authority

to transact business in this state $40(f) Annual report of a domestic or foreign

corporation $10(g) Certificate of existence or authorization $10(h) Amendments to articles of incorporation and

authority $10(i) Restated articles of incorporation $10

12

ORS 65.007

this Act uses the defined term "filed" throughout (and it has beendefined to require both receipt and acceptance by the Secretary),that term has been substituted and cross-referenced here in lieu ofusing either existing ORS 61.018(10) or ORS 60.004(1O)'s "delivery" or the Model Act's ambiguously defined term.

The final references in the Model Act to other taxes, penalties,etc., are deleted to conform to Chapter 60 and because Oregon presently has no such provisions.

(2) Effective Changes from Chapter 61 Provisions: The ModelAct permits use of either "exact or conformed" copies instead of"true" copies, as required in existing ORS 61.018(9). The ModelAct's easing of the technical rule was accepted as desirable. Thepr~visions in ex~sting ORS 61.018(5) have also been clarified to permIt ~se of ArabIc and Roman numerals and incidental punctuation,despIte the "English language" requirement, in order to conform toprovisions of existing ORS 61.072 and ORS 60.094(3). See alsocomment (1).

(3) Relationship to the Oregon Business Corporation Act: Chapter 61 presently parallels existing ORS 60.004.

65.007 FILING, SERVICE AND COPYING FEES

(1) The Secretary of State shall collect the following fees fordocuments delivered for filing:

ORS 65.011

65.011 EFFECTIVE TIME AND DATE OF DOCUMENT

(1) Except as provided in subsection (2) of this section, ORS56.080 and 65.014, a document accepted for filing after review iseffective:

(a) On the date it is filed by the Secretary of State; and(b) At the time, if any, specified in the document as its effective

time or at 12:01 a.m. on that date if no effective time is specified.(2) If a document specifies a delayed effective time and date, the

document becomes effective at the time and date specified. If a document specifies a delayed effective date but no time, the documentbecomes effective at 12:01 a.m. on that date. A delayed effectivedate for a document may not be later than the 90th day after thedate it is filed. [1989 c.1010 § 6]

OFFICIAL COMMENT TO ORS 65.011 (MODEL ACT § 1.23)

(1) Proposed Changes to the Model Act: The language of theModel Act is revised to conform to Chapter 60. The concept of adocument as effective when first received at the Secretary of State'soffice (regardless of whether it is found to be acceptable on laterreview) is rejected as unworkable and inconsistent with ORS Chapter 60. The Model Act's "default" provision for the delayed effective time when one is not explicitly specified, has been changed fromthe end of the day to its beginning to limit the risk of inadvertentpre-incorporation acts.

(2) Effective Changes/rom Chapter 61 Provisions: None, exceptclarification of the effective time when one is not specified but adelayed date is specified.

(3) Relationship to the Oregon Business Corporation Act: Thissection picks up the proposed clarification of existing ORS60.011(1) and (2) concerning the effective time when only a delayeddate is specified and is otherwise identical to ORS 60.011, except foreditorial insertion of the words "after review" in (1) for furtherassistance to lay users of the Act.

65.014 CORRECTING FILED DOCUMENT

(1) A domestic or foreign corporation may correct a documentfiled by the Secretary of State other than an annual report, if thedocument:

(a) Contains an incorrect statement; or

14

ORS 65.014

(b) Was defectively executed, attested, sealed, verified oracknowledged.

(2) Errors in annual reports may be corrected as provided inORS 65.787.

(3) A domestic or foreign corporation seeking to correct a document shall deliver the articles of correction to the Office of the Secretary of State for filing. The articles shall include the following:

(a) A description of the incorrect document, including its filingdate or a copy of the document;

(b) A description of the incorrect statement and the reason it isincorrect or a description of the manner in which the execution,attestation, seal, verification or acknowledgment is defective; and

(c) A correction of the incorrect statement or defective execution, attestation, seal, verification or acknowledgment.

(4) Articles of correction are effective on the effective date of thedocument they correct except as to persons relying on the uncorrected document and adversely affected by the correction. As tothose persons, articles of correction are effective when filed by theSecretary of State.

(5) An incorrect document with a delayed effective date may alsobe corrected by withdrawal and new filing pursuant to the provisions of ORS 56.080. [1989 c.1010 § 7]


(1) Proposed Changes to the Model Act: The Model Act's language has been revised to conform to ORS Chapter 60, without substantive change except that: (1) annual reports are excluded fromoperation of this section due to separate coverage elsewhere; (b) correction of problems in attestation, seal, verification and acknowledgment are explicitly permitted; and (c) reference to use ofwithdrawal as a means to correct an error has been inserted.

(2) Effective Changes/rom Chapter 61 Provisions: None, exceptaddition of a cross-reference to withdrawal of documents underORS 56.080 as a means to correct an error.

(3) Relationship to the Oregon Business Corporation Act: Provisions are parallel to ORS 60.014, with the exception of cross-reference to the special correction procedures for annual reports,addition of clarifying language to help lay users avoid erroneous

15

ORS 65.016

assumptions about when a document is "filed," and the cross-reference on withdrawal noted in comment (2).

65.016 FORMS

(1) Upon request, the Secretary of State shall furnish forms for:(a) A foreign corporation's application for authority to transact

business in this state;

(b) A foreign corporation's application for withdrawal; and(c) An annual report.

(2) The Secretary of State may by rule require the use of theforms listed under subsection (1) of this section.

(3) Upon request, the Secretary of State shall furnish forms forother documents required or permitted to be filed by this chapter.Use of such forms is not required. [1989 c.1010 § 4]


(1) Proposed Changes to the Model Act: The Model Act language was edited to conform to existing ORS Chapter 60, withoutsubstantive change.

(2) Effective Changes/rom Chapter 61 Provisions: None.(3) Relationship to the Oregon Business Corporation Act: Identi

cal to ORS 60.016.

65.017 FILING DUTY OF SECRETARY OF STATE

(1) If a document delivered to the Office of the Secretary ofState for filing satisfies the requirements of ORS 65.004, the Secretary of State shall file it.

(2) The Secretary of State files a document by indicating thereonthat it has been filed by the Secretary of State and the date of filing.The time of filing shall be deemed to be 12:01 a.m. on that date.After filing a document, except those referred to in ORS 65.114,65.671, 65.674, 65.724 and 65.787, the Secretary of State shall return a copy to the domestic or foreign corporation or itsrepresentative.

(3) If the Secretary of State refuses to file a document, the Secretary of State shall return it to the domestic or foreign corporationor its representative within 10 business days after the document wasreceived by the Office of the Secretary of State, together with abrief written explanation of the reason or reasons for the refusal.

16

ORS 65.017

(4) The Secretary of State's duty to file documents under thissection is ministerial. The Secretary of State is not required to verify or inquire into the legality or truth of any matter included inany document delivered to the Office of the Secretary of State forfiling. Except as provided elsewhere in this chapter, the Secretaryof State's filing or refusing to file a document does not:

(a) Affect the validity or invalidity of the document in whole orin part except as provided in ORS 65.051; or

(b) Relate to the correctness or incorrectness of information contained in the document.

(5) The Secretary of State's refusal to file a document does notcreate a presumption that the document is invalid or that information contained in the document is incorrect. [1989 c.1010 § 8]


(1) Proposed Changes to the Model Act: Model Act languagehas been revised to conform to ORS Chapter 60 and its proposedrevisions. Accordingly, (a) the time to reject a document has beenlengthened from five days to ten business days; (b) the Model Actconcept of "effective upon deposit" is rejected in favor of an "effective upon review and filing" standard; (c) the numerous Oregonstatutory provisions which are exceptions to the duty to return acopy to the originator are cross-referenced; and (d) an additionalsentence explicitly limiting the Secretary's duty of inquiry has beenadded.

In addition to those changes to conform to ORS Chapter 60, theproposal also corrects a potentially misleading statement in ModelAct § 1.25(d)(3), which implies that filing or rejection never createsany presumptions concerning validity of stated facts. ORS65.024(2) does make filing "prima facie evidence" of all facts required to be included in the document so that effect has been crossreferenced.

(2) Effective Changes/rom Chapter 61 Provisions: The proposaleliminates reference to the returned copy as a "true" copy, sinceconformed copies are acceptable for this purpose under this Act. Inaddition, since an effective time of filing is referred to in other sections, a presumed "time" is also supplied in this provision both toavoid the need for the Secretary to time-stamp all documents uponfiling, and to decrease the risk of inadvertent pre-incorporation. ac-

17

ORS 65.021

tivity. The proposal also corrects ORS 61.034's misleading flatstatement that filing creates no presumptions of validity of correctness of stated information. ORS 65.024 in fact makes the filed document "prima facie evidence" of all facts required to be included.

(3) Relationship to the Oregon Business Corporation Act: Thissection parallels ORS 60.017 except by deleting the word "true"with respect to the copy and the addition of a cross-reference toORS 65.051. The changes are clarifications rather than alterationsof substance. Subsection (4) picks up the proposed revision ofORS60.017 by deleting reference to mandatory rule-making by the Secretary of State, a change requested by the Corporation Division.

65.021 ApPEAL FROM SECRETARY OF STATE'S REFUSAL TO FILEDOCUMENT

If the Secretary of State refuses to file a document delivered tothe Office of Secretary of State for filing, the domestic or foreigncorporation, in addition to any other legal remedy which may beavailable, shall have the right to appeal from such final order pursuant to the provisions of ORS 183.484. [1989 c.1010 § 9]


(1) Proposed Changes to the Model Act: The Model Act lang~a~e has been revised to parallel ORS Chapter 60, deleting jurisdIctIOnal and procedural matters which are covered in generaladministrative appeal materials in ORS Chapter 183. ORS 183.484of that chapter places jurisdiction of noncontested case orders inMarion County or the county where the petitioner "resides or has aprincipal business office," and only requires a statement of how oneis aggrieved by the order challenged (not attachment of the Secretary's explanation, as provided in the Model Act). The cross-referenced chapter or ORS also sets forth the limits of court review (toset asi.de an order if a different action is compelled by proper interpre~atIOn of the law and to remand for abuse of discretion) but,unlIke the Model Act, does not provide explicitly for summary orders. While the Task Force agrees with the Model Act drafters thatsummary orders are desirable in most appeals of ministerial actsunder the Act, it was not felt to be desirable to create special procedural rules not applicable to all actions under the state Administrative Procedures Act. It is hoped that application of the

18

ORS 65.024

Administrative Procedures Act will achieve expeditiousdeterminations.

ORS Chapter 183 provides for further appeal in such matters "asprovided for appeals from the circuit court in suits in equity" - i.e. ,is more specific on the standard of review than the Model Act. Italso has a provision (ORS 183.486(1)(b)) for "ancillary relief thecourt finds necessary to redress the effects of official action wrongfully taken or withheld," but not one as broad as the Model Act's§ 1.26(b). Here too it was deemed preferable to address any neededchanges in the Administrative Procedures Act by direct revision ofits provisions and not by inserting new provisions in this Act.

(2) Effective Changes from Chapter 61 Provisions: The proposalparallels current ORS Chapter 61.037 except by using a more precise cross-reference to Chapter 183 in order to resolve potential issues of whether a Secretary's refusal to file a document is a "finalorder" or leads to "contested case" proceedings. Because the dutyis ministerial, an evidentiary hearing at the administrative level wasnot felt to be useful, so an explicit "final order" approach was used.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.021, except with respect to the more precise cross-reference to the provisions of ORS Chapter 183. Seecomment (2).

65.024 EVIDENTIARY EFFECT OF CERTIFIED COPY OF FILEDDOCUMENT OR SECRETARY'S CERTIFICATE

(1) A certificate bearing the Secretary of State's signature,which may be in facsimile, and attached to a copy of a document isconclusive evidence that the original document or a facsimilethereof is on file with the Office of the Secretary of State.

(2) The following shall be received in all courts, public officesand official bodies of this state as prima facie evidence of the factsstated therein, unless a greater evidentiary effect is provided inORS 65.027 and 65.051 or elsewhere in this chapter or it is shownthat the document was thereafter corrected or withdrawn from thefiles of the Office of the Secretary of State:

(a) All facts stated in certificates issued by the Office of the Secretary of State with respect to its business registry functions including a certificate of compliance or noncompliance of a documentwith filing requirements or other provisions of law administered by

19

ORS 65.024

the Office of the Secretary of State, or a certificate as to the existence or nonexistence of facts which would appear from presence orabsence of documents in the files of the Office of the Secretary ofState; and

(b) All facts stated in documents certified as filed by the Officeof the Secretary of State, but only to the extent the specific itemswere required to be included in the document by this chapter orORS chapter 61 (1987 Replacement Part). [1989 c.l0l0 § 10]


(1) Changes to the Model Act: The Model Act language hasbeen changed to follow ORS Chapter 60. The title and content ofthis section are expanded to set out the evidentiary effects found inORS 56.110 concerning certificates other than certification of filing.A qualification concerning the effect of documents withdrawnunder ORS 56.080 also was added.

(2) Effective Changes from Chapter 61 Provisions: None; theproposal parallels existing ORS 61.041(1) except for deletion of thequalifying phrase "filed by the Secretary of State," a requirementwhich is somewhat circular when the object of the certificate is toprove that the document has been filed. The title has also been corrected to reflect both of the subjects covered in the section. ORS61.041(2)'s wholesale incorporation of ORS 56.100 (which in turngives prima facie evidentiary effect to all "facts" in a filed document) has been deleted as inconsistent with ORS 65.017 and ORS65.051, Model Act §§ 1.25 and 2.03. (Those sections limit the reviewing function of the Secretary, and expressly disclaim any presumption of correctness of any fact stated in a document other thanrequired facts.)

ORS 56.110 also clearly conflicts with both existing for-profit andnonprofit corporation law (ORS 60.024(1) and ORS 61.041(1)) aswell as this section and ORS 65.027, Model Act § 1.28, insofar as itprovides that a certificate issued by the Secretary presumably including certification that a document is on file and a certificate ofexistence or authorization is only "prima facie evidence of the factsstated in the certificate." Both this proposal and existing provisionsin both ORS Chapters 60 and 61 provide for conclusive effect forsome certificates. It is the drafters' intent that the provisions of thisAct prevail over the generalities of ORS 56.110.

20

ORS 65.027

To the extent it gives prima facie evidentiary effect to requiredcontents of a document or conditions precedent to filing, the provisions of ORS 56.110 have been retained but are restructured to coordinate them with other relevant provisions and are modified todeal with the logical effects of "corrected" documents.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.024 except as noted in comment (2)above, with respect to ORS 56.110.

65.027 CERTIFICATE OF EXISTENCE OR AUTHORIZATION

(1) Anyone may apply to the Office of the Secretary of State tofurnish a certificate of existence for a domestic corporation or acertificate of authorization for a foreign corporation.

(2) A certificate of existence or authorization, when issued,means that:

(a) The domestic corporation's corporate name or the foreigncorporation's corporate name is of active record in this state;

(b) The domestic corporation is duly incorporated under the lawof this state or the foreign corporation is authorized to transactbusiness in this state;

(c) All fees payable to the Secretary of State under this chapterhave been paid, if nonpayment affects the existence or authorization of the domestic or foreign corporation;

(d) An annual report if required by ORS 65.787 has been filed bythe Secretary of State within the preceding 14 months; and

(e) Articles of dissolution or an application for withdrawal havenot been filed by the Secretary of State.

(3) A person may apply to the Secretary of State to issue a certificate covering any fact of record.

(4) Subject to any qualification stated in the certificate, a certificate of existence or authorization issued by the Secretary of Statemay be relied upon as conclusive evidence that the domestic or foreign corporation is in existence or is authorized to transact businessin this state. [1989 c.l0l0 § 11]


(1) Proposed Changes to the Model Act: The Model Act language has been rejected in favor of the language now used in bothORS Chapters 60 and 61. Those changes extend the scope of this

21

ORS 65.031

provision to cover the effect of the relevant certificate as to foreigncorporations (certificate of authorization), give the certificate the effect of proving the corporate name is of record, eliminate the needto state the date of incorporation and dates of duration (unless specifically requested), delete assurances concerning taxes and pe~alti~sand other payments not managed by the Secretary of State in thISstate, give assurances that no application for withdrawal is on ~le,and link the assurances of an annual report to the Oregon fihng

period.(2) Effective Changes from Chapter 61 Provisions: The proposal

follows ORS 61.044 except for: (a) correction of ORS61.044(2)(a)'s inaccurate use of the word "registered" to refer to thefact that a domestic or authorized foreign corporation's name is ofrecord in this state ("registered" is used in ORS 65.101, Model Act§ 4.03, to describe recording of the name of companies not organized or doing business in Oregon); and (b) recognition that a corporation may not yet have had a duty to file an annual report.

(3) Relationship to the Oregon Business Corporation Act: Parallels ORS 60.027 except as noted in comment (2).

(SECRETARY OF STATE)

65.031 POWERS

The Secretary of State has the power reasonably necessary toperform the duties required of the Office of the Secretary of Stateby this chapter. [1989 c.l0l0 § 13]


(1) Proposed Changes to the Model Act: The title of this sectionhas been amplified to distinguish it from sections on corporate powers, without other change.

(2) Effective Changes from Chapter 61 Provisions: The wordingof ORS Chapter 60 has been substituted for the existing provisionfor consistency, without substantive change.

(3) Relationship to the Oregon Business Corporation Act: Theprovision is identical to ORS 60.031 except for an editorial correction so that the reference is to duties of the Secretary of State's office, rather than just the Secretary per se.

22

ORS 65.034

(NOTICE)

65.034 NOTICE

(1) Notice may be oral or written unless otherwise specified for aparticular kind of notice.

(2) Notice may be communicated in person, by telephone, telegraph, teletype or other form of wire or wireless communication, orby mail or private carrier, including publication in a newsletter orsimilar document mailed to a member's or director's address. Ifthese forms of personal notice are impracticable, notice may becommunicated by a newspaper of general circulation in the areawhere the meeting is to be held, or by radio, television or otherform of public broadcast communication.

(3) Written notice by a domestic or foreign corporation to itsmember, if in a comprehensible form, is effective when mailed if itis mailed postpaid and is correctly addressed to the member's address shown in the corporation's current records of members.

(4) Oral notice is effective when communicated if communicatedin a comprehensible manner.

(5) Except as provided in subsection (3) of this section, personalwritten notice, if in a comprehensible form, is effective at the earliest of the following:

(a) When received;(b) Five days after its postmark, if mailed by United States mail

correctly addressed and with first class postage affixed;(c) On the date shown on the return receipt, if sent by registered

or certified mail, return receipt requested, and the receipt is signedby or on behalf of the addressee;

(d) Thirty days after its deposit in the United States mail ifmailed correctly addressed and with other than first class, registered or certified postage affixed; or

(e) The date specified by the articles of incorporation or bylawswith respect to notice to directors.

(6)(a) Written notice is correctly addressed to a member of a domestic or foreign corporation if addressed to the member's addressshown in the corporation's current list of members.

(b) A written notice or report delivered as part of a newsletter,magazine or other publication sent to members shall constitute awritten notice or report if addressed or delivered to the member's

23

ORS 65.034

address shown in the corporation's current list of members, or inthe case of members who are residents of the same household andwho have the same address in the corporation's current list of members, if addressed or delivered to one of such members, at the address appearing on the current list of members.

(c) Written notice is correctly addressed to a domestic or foreigncorporation authorized to transact business in this state, other thanin its capacity as a member, if addressed to its registered agent or,if none is of record, to its principal office shown in its most recentannual report or, if none, in the articles of incorporation or its application for a certificate of authority to do business.

(7) If ORS 65.214 or any other provision of this chapterprescribes different notice requirements for particular circumstances, those requirements govern. If articles or bylaws prescribedifferent notice requirements, not less stringent than the provisionsof this section or other provisions of this chapter, those requirements govern. [1989 c.l0l0 § 15]


(1) Proposed Changes to the Model Act: Subsection (2) revisessubsection (b) of the Model Act in order to be consistent with thepublication provisions of ORS 65.034(6)(b) and so that the requirement of a paper of "general circulation" is meaningfully related toits notice function. The "mailbox rule" corresponding to ORS60.034(3)'s provisions for notice to shareholders was substituted, asORS 65.034(3), for the more stringent Model Act requirements fornotice to members when personal notice is given, but not when bulkmailing or newsletters are used for notice. A confusing and superfluous reference to "deposit" is removed from ORS 65.034(5).

The provisions of ORS 65.034(5)(d) modify the Model Act sincebulk mailing by permit (frequently used by nonprofits) does not ordinarily produce a postmark. The requirement that a newsletter beone "regularly sent" was deleted from ORS 65.034(6)(b) because itwas felt to serve no purpose. Model Act subsection (g), ORS65.034(6)(c), was revised to address the problem of nonprofits thatdo not designate a registered agent or have a real office. Model Actsubsection (h), ORS 65.034(7), is revised to remove the inappropriate term "inconsistent with." See comment (3).

(2) Effective Changes from Chapter 61 Provisions: The present

24

ORS 65.034

statute (ORS 61.105) lacks provisions on giving notice to full members by means other than individual notice mailed with first classpostage and also lacks provisions on calculation of effective dateswhen other means of notice are used. Existing provisions in ORS61.105(2) and (3) for less formal forms of notice to limited classes ofmembers are extended to broader groups. The "mailbox rule" forthe effective date of individual notice in ORS 61.105(1) is retained.

(3) Relationship to the Oregon Business Corporation Act: ORS60.034(1) establishes written notice as the general rule for businesscorporations. The Nonprofit Corporation Act proposal sanctionsoral notice unless it is specifically prohibited for a particular activity. Subsection (2) has been expanded beyond the provisions of itscorollary (ORS 60.034(2)) to coordinate it with publication provisions included in subsection (6) of the proposal. ORS 60.034(3) requires all notices to shareholders to be in writing but makes suchnotice effective upon mailing. In contrast, the proposal allows morecasual forms of communication to nonprofit "members," and follows the more restrictive rules for calculating the effective datewhen those methods are used. ORS 60.034(3)'s provision of the"mailbox rule" when individual notice is given to shareholders isretained for members as well.

Subsection (5) of the proposal follows ORS 60.034(5) but distinguishes published written notice and use of non-first class publications (which are often used for nonprofits but not by businesscorporations). It eliminates the superfluous and confusing referenceto deposit date, since the postmark should control, and clarifies thatit applies only to regular U.S. mail service.

A proposed change to ORS 60.034(5) permitting articles or bylaws to set alternate shorter periods for effective notice to directorshas also been incorporated in this proposal for the Nonprofit Act.Subsection (6) (concerning how to address a notice) parallels ORS60.034(3) but has additional provisions for publication, which wasnot authorized for business corporations. Subsection (7) parallelsORS 60.034(7) but the language has been changed to clarify thevague term "not inconsistent with." (Since the point of the provision is to resolve issues of primacy of different provisions containedin other documents, those provisions will always be "inconsistentwith" these provisions: there would be no need for the provisionotherwise.)

25

ORS 65.036

(PRIVATE FOUNDATIONS)

65.036 PRIVATE FOUNDAnONS

Except where otherwise determined by a court of competent jurisdiction, a corporation which is a private foundation as defined insection 509 of the Internal Revenue Code of 1986 shall:

(1) Distribute such amounts for each taxable year at such timeand in such manner as not to subject the corporation to tax undersection 4942 of the Internal Revenue Code of 1986;

(2) Not engage in any act of self-dealing as defined in section4941(d) of the Internal Revenue Code of 1986;

(3) Not retain any excess business holdings as defined in section4943(c) of the Internal Revenue Code of 1986;

(4) Not make any investments in such a manner as to subject thecorporation to taxes on investments which jeopardize charitablepurposes as provided in section 4944 of the Internal Revenue Codeof 1986; and

(5) Not make any taxable expenditures as defined in section4945(d) of the Internal Revenue Code of 1986. [1989 c.1010 § 16]


(1) Proposed Changes to the Model Act: The "Code" is moreaccurately defined as the 1986 version. Subsection (4) is added toparallel Internal Revenue Code provisions and those of existingORS 61.955. The Model Act's clause incorporating unspecified future amendments of the Code was deleted because of concern itwould constitute an unconstitutional delegation of legislative authority under the Oregon Constitution.

(2) Effective Changes from Chapter 61 Provisions: See (1) immediately above.

(3) Relationship to the Oregon Business Corporation Act: Norelevant section.

(JUDICIAL RELIEF)

65.038 JUDICIAL RELIEF

(1) If for any reason it is impractical or impossible for any corporation to call or conduct a meeting of its members, delegates ordirectors, or otherwise obtain their consent in the manner prescribed by its articles, bylaws or this chapter, then upon petition of

26

ORS 65.038

a director, officer, delegate, member or the Attorney General, thecircuit court for the State of Oregon for the county in which theprincipal office designated on the last filed annual report, articles orapplication for authority to transact business is located, or if none,within Oregon, Marion County, may order that such a meeting becalled. The court may also order that a written ballot or other formof obtaining the vote of members, delegates or directors be authorized, in such a manner as the court finds fair and equitable underthe circumstances.

(2) The court shall, in an order issued pursuant to this section,provide for a method of notice reasonably designed to give actualnotice to all persons who would be entitled to notice of a meetingheld pursuant to the articles, bylaws and this chapter, whether ornot the method results in actual notice to all such persons or conforms to the notice requirements that would otherwise apply. In aproceeding under this section, the court may determine who are themembers or directors.

(3) The order issued pursuant to this section may for good causeshown dispense with any requirement relating to the holding of orvoting at meetings or obtaining votes, including any requirementthat would otherwise be imposed by the articles, bylaws or thischapter as to quorum or as to the number or percentage of votesneeded for approval of an act.

(4) Whenever practical, any order issued pursuant to this sectionshall limit the subject matter of meetings or other forms of consentjudicially authorized to those items, including amendments to thearticles or bylaws, the resolution of which will or may enable thecorporation to continue managing its affairs without further resortto this section. An order under this section may also authorize theobtaining of whatever votes and approvals are necessary for the dissolution, merger or sale of assets.

(5) Any meeting or other method of obtaining the vote of members, delegates or directors conducted pursuant to an order issuedunder this section, and which complies with all the provisions ofsuch order, is for all purposes a valid meeting or vote, as the casemay be, and shall have the same force and effect as if it compliedwith every requirement imposed by the articles, bylaws and thischapter. [1989 c.1010 § 17]

27

ORS 65.040


(1) Proposed Changes to the Model Act: The county where judicial relief can be obtained has been specified and a "good cause"standard explicitly required in (3) as justification for deviation fromotherwise applicable requirements.

(2) Effective Changes from Chapter 61 Provisions: There are noexplicit existing provisions on this subject, but the proposal conforms with general principles of equity.

(3) Relationship to the Oregon Business Corporation Act: ORS60.207 provides a means for a court to order meetings and makerelated findings on entitlement to notice, vote, etc., but only if theannual meeting was not timely held or the officers refused to givenotice of a shareholder-triggered special meeting. Under its provisions, only aggrieved shareholders can institute such proceedings.There is a presumption in Chapter 60-not always appropriate in anonprofit context-that the corporation can always figure out whoits shareholders are, give them effective notice and achieve a quorum if it wants to.

ORS 60.661 provides means to deal with deadlocks once a meeting is called. That subject is covered in ORS 65.661.

(ATTORNEY GENERAL)

65.040 NOTICE TO ArrORNEY GENERAL; EFFECT OF FAILURETO NOTIFY

(1) The Attorney General shall be given notice of the commencement of any proceeding which ORS 65.038, 65.084, 65.207, 65.327,65.661 or 65.751 or any other provision of this chapter authorizethe Attorney General to bring but which has been commenced byanother person.

(2) Whenever any provision of this chapter requires that noticebe given to the Attorney General before or after commencing a proceeding or permits the Attorney General to commence aproceeding:

(a) If no proceeding has been commenced, the Attorney Generalmay take appropriate action including, but not limited to, seekinginjunctive relief; or

(b) If a proceeding has been commenced by a person other than

28

ORS 65.042

the Attorney General, the Attorney General, as of right, may intervene in such proceeding. [1989 c.l0l0 § 18]


(1) Proposed Changes to the Model Act: Cross-references areadded.

(2) Effective Changes from Chapter 61 Provisions: The Attorney General is not assured by the existing statutory provisions ofreceiving notice of relevant litigation, and his explicit enforcementauthority is limited to ORS 61.565 (conduct challenged in thecourse of actions seeking dissolution). In the proposal, the scope ofthe Attorney General's powers is defined in other sections and encompasses power to seek an injunction.

(3) Relationship to the Oregon Business Corporation Act: ORS60.661 provides the Attorney General a role in the event of corporate deadlock and dissolution. (The comparable provisions in thisproposal are found in ORS 65.661, Model Act § 14.30.) ORS60.661 has no provisions on notice to the Attorney General of relevant litigation nor does it accord him as broad a role as he is accorded with respect to nonprofit corporations in this proposal.

(RELIGIOUS CORPORATIONS)

65.042 RELIGIOUS CORPORATIONS; CONSTITUTIONALPROTECTIONS

If religious doctrine or practice governing the affairs of a religious corporation is inconsistent with the provisions of this chapteron the same subject, the religious doctrine or practice shall controlto the extent required by the Constitution of the United States orthe Constitution of this state, or both. [1989 c.l0l0 § 19]


(1) Proposed Changes to the Model Act: Addition of the phrase"or practice" since not all religious organization derives from"doctrine."

(2) Effective Changes from Chapter 61 Provisions: This provision highlights constitutional rights which exist in case law butwhich are not explicit in existing statutes.

(3) Relationship to the Oregon Business Corporation Act: None.

29

ORS 65.044

INCORPORATION

65.044 INCORPORATORS

One or more individuals 18 years of age or older, a domestic orforeign corporation, a partnership or an association may act as incorporators of a corporation by delivering articles of incorporationto the Secretary of State for filing. [1989 c.1010 § 20]


(1) Proposed Changes to the Model Act: Existing Oregon lawrequires incorporators to be 18 years old or older. The Model Act'spermission for an individual of any age to act as an incorporatorwas rejected. While the Task Force recognized that such a provision might, on a rare occasion, serve to validate legitimate expectations when a technical error has been made, it did not wish to createlarger problems by encouraging individuals with limited legal responsibility for their business acts to undertake steps that deserveserious and responsible action.

The Model Act's broad authorization to any "person" to serve asincorporator was rejected in favor of existing Business CorporationAct and ORS Chapter 61 provisions, which limit that role to individuals, corporations, partnerships and "associations."

(2) Effective Changes from Chapter 61 Provisions: This provision parallels ORS 61.305.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.044.

65.047 ARTICLES OF INCORPORAnON

(1) The articles of incorporation formed pursuant to this chaptersubsequent to October 3, 1989, shall set forth:

(a) A corporate name for the corporation that satisfies the re-quirements of ORS 65.094;

(b) One of the following statements or words of similar import:(A) This corporation is a public benefit corporation;(8) This corporation is a mutual benefit corporation; or(C) This corporation is a religious corporation;(c) The address, including street and number, of the corpora

tion's initial registered office and the name of its initial registeredagent at that location;

30

ORS 65.047

(d) The name and address of each incorporator;(e) An alternate corporate mailing address which shall be that of

the principal office, as defined in ORS 65.001, to which notices, asrequired by this chapter, may be mailed until the principal office ofthe corporation has been designated by the corporation in its annualreport;

(0 Whether or not the corporation will have members as thatterm is defined in this chapter; and

(g) Provisions regarding the distribution of assets on dissolution.(2) The articles of incorporation may set forth:(a) The names and addresses of the initial directors;(b) Provisions regarding:(A) The purpose or purposes for which the corporation is

organized;(B) Managing and regulating the affairs of the corporation;(C) Defining, limiting and regulating the powers of the corpora

tion, its board of directors, and members or any class of members;and

(D) The characteristics, qualifications, rights, limitations and obligations attaching to each or any class of members;

(c) A provision eliminating or limiting the personal liability of adirector or uncompensated officer to the corporation or its membersfor monetary damages for conduct as a director or officer, providedthat no such provision shall eliminate or limit the liability of a director or officer for any act or omission occurring prior to the datewhen such provision becomes effective, and such provision shall noteliminate or limit the liability of a director or officer for:

(A) Any breach of the director's or officer's duty of loyalty to thecorporation or its members;

(B) Acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

(C) Any unlawful distribution;(D) Any transaction from which the director or officer derived

an improper personal benefit; and(E) Any act or omission in violation of ORS 65.361 to 65.367;

and(d) Any provision that under this chapter is required or permit

ted to be set forth in the bylaws.

31

ORS 65.047

(3) The incorporator or incorporators must sign the articles andbefore including the name of any individual as a director shall statethat they have obtained the consent of each director named to serve.

(4) The articles of incorporation need not set forth any of thecorporate powers enumerated in this chapter but may restrict themin order to meet federal tax code requirements or other purposes.[1989 c.1010 § 21]


(1) Proposed Changes to the Model Act: A phrase has been added to subsection (1) to avoid any unintended inference that existing nonprofit corporations must redo their articles to include thenew classifications. Language has been added from existing law andthe Oregon Business Corporation Act, which require the mailingaddress of the "principal place of business" pending the annual report designation. Subsections (1)(c) and (1)(e) have been revised inaccordance with the Corporation Division's request for clarificationof the relationship of the two requested addresses. The "principalbusiness" address serves as an alternate and is particularly important if the registered agent resigns. See discussion in comments toORS 65.117, Model Act § 5.03.

Where the word "member" is introduced in subsection (1)(t), itsunique statutory definition is emphasized to avoid confusion withnonstatutory definitions. The authority of the Secretary of State toadd additional requirements for identifying data has also been retained from the existing law.

The Model Act's inclusion of the words "not inconsistent withlaw" has been rejected in provisions relating to "final distributions"and "provisions for management of corporate affairs," both in orderto parallel the Oregon Business Corporation Act and to give effectto the Model Act's intent that the Secretary of State not have tomake any judgment about the legality of provisions inserted in thearticles. Note ORS 65.051, Model Act § 2.03, which make filingconclusive proof of satisfaction of all conditions precedent to incorporation. If the provisions on distribution must be "in conformancewith the law" to permit filing, which in tum is necessary for incorporation, then filing would have the effect of establishing that thedissolution distribution provisions are legally permissible, absent

32

ORS 65.047

the suggested change. The Corporation Division is not in a positionto make such a determination.

Subsection (4) adds language cuing lay users that they may notwant to accept the default "all lawful powers" provision.

The Model Act's alternative (concerning immunity for directorsand officers) has been reworded in ORS 65.047(2)(c) for consistencywith proposed changes to ORS 60.047 in the Oregon Business Corporation Act.

The Model Act requires that each incorporator and directornamed in the articles must sign them. That requirement can be burdensome when, as is common with nonprofit groups, such individuals may reside throughout the state (or outside the state). Sincedirectors need not be named and a single person can act as incorporator, the burden can be readily avoided by a knowledgeable incorporator. It was the conclusion of the Task Force, however, that nouseful purpose would be served by discouraging multiple incorporators since it would result in the official records not reflecting theidentity of principals in new corporations until the first annual report is filed under ORS 65.787, Model Act § 16.22. The Task Forcewas also aware that many laymen forming nonprofit organizationsare reluctant to take on the perceived responsibilities of being a soleincorporator. The only identified purpose of the Model Act requirement of actual signatures is to avoid the complications of unauthorized naming of celebrities and others as directors when theyhave not agreed to serve. A provision requiring the incorporatorsto affirmatively state that they have obtained consent of the nameddirectors has been substituted in the proposal in lieu of their signatures. That requirement, plus the new penalties for presenting documents with false statements for filing, should be sufficient deterrentto prevent insertion of unauthorized names.

(2) Effective Changes from Chapter 61 Provisions: The existinglaw's provision on perpetual duration (absent other provision in thearticles) is provided elsewhere (ORS 65.077, Model Act § 3.02) andhas been dropped from this section. Existing ORS 61.31 1(b) alsorequires an express statement of purposes in the articles but permitsit to be "all lawful activities"; the proposal makes any statement ofpurpose optional since ORS 65.074, Model Act § 3.01, provides thenecessary default provision.

The proposal also discontinues the existing requirement for state-

33

ORS 65.047

ment of the names and addresses of the initial directors as unnecessary in the articles. ORS 61.311(1)(e)'s provision for an interimmailing address other than that of the registered agent has been retained but clarified as requested by the Corporation Division toavoid provision of a single address for purposes of both ORS65.047(1)(c) and (e) since the purpose of (e) is to provide an alternate address when the corporation is without a registered agent orcannot be reached by that means.

Semantic confusion in ORS 61.311 (which stated that the Articles "shall include . . . provisions the incorporators elect to setforth") has been eliminated and statements of the mechanisms formanagement of the affairs of the corporation have clearly been identified as optional. Unlike existing ORS 61.311, the proposal makesa statement of the provisions for distribution of assets upon dissolution mandatory, since that is a key factor in proper characterizationof the organization in the new tripartite approach.

Existing ORS 61.311 requires the articles to specify how successor directors are selected (in more detail than a statement that thereare or are not "members"). Under the proposal, those provisionsmay now be reserved for the bylaws. The decisions to permit transfer of this basic information about control of the organization to itsbylaws, which are not public documents, parallels the handling ofthe issue under the Oregon Business Corporation Act; it also makesthe provisions easier to change. At the request of the CorporationDivision, the ORS 61.311(4) provision for the Secretary of State toexpand mandatory identification data by rule has been deleted assuperfluous.

Existing ORS 61.218, reenacted as ORS 65.369, immunizes uncompensated officers and directors for acts which are neither grossnegligence nor "intentional acts"; it is self executing. In contrast,this section potentially extends immunity to a broader group (including all directors whether or not compensated) but it requires aprovision in the articles to obtain the immunity. The immunityavailable under this section is also broader than ORS 65.369 andexisting ORS 61.218 in that it covers even "gross negligence" ifit isnot a breach of loyalty, in bad faith, intentional misconduct, knowing violation of law, an unlawful distribution, an improper persondbenefit or a violation of ORS 65.361, 65.364, 65.367 or Model Act§§ 8.31-8.33.

34

ORS 65.051

(3) Relationship to the Oregon Business Corporation Act: Thissection parallels the Oregon Business Corporation Act (ORS60.047), deleting inappropriate provisions concerning number ofshares and par value and adding corollary provisions concerningmembers, distribution on dissolution, and the tripartite grouping ofnonprofit corporations. Technical changes requested by the Corporation Division clarifying the relationship between the addresses requested for the registered agent and as an interim alternate mailingaddress have been implemented here despite the fact they were notaccepted by the revisors of the Business Corporation Act for ORS60.047. A laymen's "cue" regarding possible reasons to include optional restrictions on corporate powers in the nonprofit context anda requirement of an explicit representation of consent to serve bynamed directors have been added to address problems created bythe frequency with which inexperienced individuals perform thecorporate organizational steps for nonprofits.

The Business Corporation Act's immunity for unlawful distributions has been expanded to exclude any conduct wrongful underORS 65.361, 65.364, 65.367 or Model Act §§ 8.31-8.33, which dealwith not only unlawful distributions but also conflicts of interestand loans to directors and officers. See comments to ORS 65.357,Model Act § 8.30. Because a nonprofit corporation's group of directors is often synonymous with its uncompensated officers, an authorization for identical immunity in that capacity is included inorder to prevent the immunized conduct from being attacked underthe guise of the alternate title.

65.051 INCORPORATION

(1) Unless a delayed effective date is specified, the corporateexistence begins when the articles of incorporation are reviewed,accepted and filed by the Secretary of State.

(2) The Secretary of State's filing of the articles of incorporationis conclusive proof that the incorporators satisfied all conditionsprecedent to incorporation applicable at the time of incorporationexcept as provided in ORS 56.080 or in a proceeding by the state tocancel or revoke the incorporation or involuntarily dissolve the corporation. [1989 c.1010 § 22]

35

ORS 65.054


(1) Proposed Changes to the Model Act: Clarification of the effect of filing (as conclusive of compliance with conditions of incorporation in effect at the time of incorporation) has been added tothe Model Act provisions since those requirements will vary overtime. The term "filed" is clarified to reflect present Oregon practice(which deviates from the Model Act by not giving effect to depositof documents at the Secretary's office but rather to their filing afterreview).

(2) Effective Changes from Chapter 61 Provisions: The ModelAct provision clears up both an oversight and unnecessarypaperwork inherent in existing ORS 61.321 (which was notamended when ORS 61.024 was enacted to allow a delayed effectivedate, and which also requires actual issuance of a certificate of incorporation rather than mere "filing" as the final step ofincorporation).

(3) Relationship to the Oregon Business Corporation Act: Theproposal directly parallels ORS 60.051 except for: (a) the proposedaddition of "applicable at the time of incorporation"; (b) insertionof a clearer statement of when something is "filed"; and (c) additionof a cross-reference to ORS 56.080 which allows withdrawal of documents to prevent their having legal effect under somecircumstances.

65.054 LIABILITY FOR PREINCORPORATION TRANSACTIONS

All persons purporting to act as or on behalf of a corporationorganized or subject to the authority of this chapter, knowing therewas no incorporation under this chapter at the relevant time, maybe held to be jointly and severally liable for all liabilities createdwhile so acting if, under the circumstances, it is equitable to do so.[1989 c.1010 § 23]


(1) Proposed Changes to the Model Act: The language used inthe Model Act does not have the effects claimed in its commentary,i.e. , it imposed absolute, not discretionary, equitable liability. It hasbeen modified to achieve its intent.

(2) Effective Changes From Chapter 61 Provisions: ExistingORS 61.940 provides that liability "shall" be imposed on those who

36

ORS 65.057

"act as a corporation without authority so to do." The literalmandatory liability-regardless of whether anyone was misle?was rejected and the archaic and ambiguous language was reVIsedto follow that of the Business Corporation Act.

(3) Relationship to the Oregon Business Corporation Act: TheModel Act, in its original form, paralleled the proposed changesnoted in (1) of the comments and would depart from the OregonBusiness Corporation Act. The Business Corporation Act rule ofabsolute liability for pre-incorporation acts, if applied literally, wasdeemed to be unduly harsh in a nonprofit context.

65.057 ORGANIZATION OF CORPORATION

(1) After incorporation:(a) If initial directors are named in the articles of incorporation,

the initial directors shall hold an organizational meeting at the callof a majority of the directors, with notice as provided in ORS65.344, to complete the organization of the corporation by appointing officers, adopting bylaws and carrying on any other business brought before the meeting.

(b) If initial directors are not named in the articles, the incorporator or incorporators shall hold an organizational meeting at thecall of a majority of the incorporators with equivalent notice to thatspecified in ORS 65.344:

(A) To complete the organization of the corporation and to electdirectors, unless the organization is a corporation sole; or

(B) To elect a board of directors which shall complete the organization of the corporation.

(2) Action required or permitted by this chapter to be taken byincorporators or directors at an organizational meeting may betaken without a meeting if the action taken is evidenced by one ormore written consents describing the action taken and signed byeach incorporator or director, in accordance with the procedures ofORS 65.341.

(3) An organizational meeting may be held in or out of this state.

[1989 c.1010 § 24]


(1) Proposed Changes to the Model Act: The Model Act's refer

37

ORS 65.061

ence to § 8.21 (ORS 65.341) is relocated to correctly reflect its subject matter.

Specific reference to directors is added in subsection (2) to avoidimplied inapplicability to director held meetings. When directorsare not named in the articles, some notice is technically required toassure a majority of incorporators do not effectively exclude a minority from the organizational meeting, even though such an eventseems unlikely. Provisions for notice and waiver of notice of directors' meetings (presumably including the organizational meeting) isalready provided in ORS 65.344, Model Act § 8.22, and has beencross-referenced so as to cover incorporator-called organizationalmeetings as well.

(2) Effective Changes from Chapter 61 Provisions: The organizational meeting is now triggered by the acts which will constituteincorporation under the proposal (and thus no longer requires a certificate of incorporation to be issued). The proposal also explicitlypermits the incorporators to conduct the organizational meeting(rather than having the directors do so as presently provided).

The explicit authorization for accomplishing the organizationwithout a meeting is new. .The existing statute's provision for threeday notice to directors of the initial meeting was eliminated as purposeless in light of new provisions for the named directors to calltheir own meeting or to have incorporators act without directors.A notice to be given to other members of the relevant group by themajority calling the meeting has been substituted.

(3) Relationship to the Oregon Business Corporation Act: TheOregon Business Corporation Act (ORS 60.057) is parallel to theModel Act provision. The changes noted in the second paragraphof part (1) of the comments are thus applicable to the Business Corporation Act as well.

65.061 BYLAWS

(1) The incorporators or board of directors of a corporation,whichever completes the organization of the corporation at its organizational meeting, shall adopt initial bylaws for the corporation.

(2) The bylaws may contain any provision for managing and regulating the affairs of the corporation that is not inconsistent withlaw or the articles of incorporation. [1989 c.1010 § 25]

38

ORS 65.064


(1) Proposed Changes to the Model Act: The Model Act language has been revised to make it clear that whichever group completes the organizational meeting is the one which adopts thebylaws, to avoid any inference of continuing power in the incorporators after that meeting. Other changes to the Model Act parallelthe Oregon Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: Consistentwith the authority in other sections of the proposal for the incorporators to delay naming directors until the end of the organizationalmeeting, the power to adopt initial bylaws has been extended tothem in the proposal. The present statutory "default" provision onpower for future bylaws amendments is unnecessary in this sectionin light of provisions in ORS 65.461, 65.464, 65.467, Model Act§§ 10.20 to 10.22, and were thus omitted.

(3) Relationship to the Oregon Business Corporation Act: Withthe exception of the clarification noted in part (1) of the comments,above, the proposal parallels ORS 60.061.

65.064 EMERGENCY BYLAWS AND POWERS

(1) Unless the articles provide otherwise, the board of directorsof a corporation may adopt, amend or repeal bylaws to be effectiveonly in an emergency as defined in subsection (4) of this section.The emergency bylaws, which are subject to amendment or repealby the members, may provide special procedures necessary for managing the corporation during the emergency, including:

(a) Procedures for calling a meeting of the board of directors;(b) Quorum requirements for the meeting; and(c) Designation of additional or substitute directors.(2) All provisions of the regular bylaws consistent with the emer

gency bylaws remain effective during the emergency. The emergency bylaws are not effective after the emergency ends.

(3) Corporate action taken in good faith in accordance with theemergency bylaws binds the corporation. A corporate director, officer, employee or agent shall not be liable for deviation from normal procedures if the conduct was authorized by emergency bylawsadopted as provided in this section.

(4) An emergency exists for purposes of this section if a quorum

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ORS 65.067

of the corporation's directors cannot readily be assembled becauseof some present or imminent catastrophic event. [1989 c.1010 § 26]


(1) Proposed Changes to the Model Act: The immunity, asphrased in the Model Act's § 2.07(c)(2), is inconsistent with thestandard of care for directors (ORS 65.357, Model Act § 8.30) andofficers (ORS 65.377, Model Act § 8.42) which extends far beyondthe kind of procedural and organizational deviations permitted inan emergency. It was reworded in the proposal (subsection (3), second sentence) to avoid impliedly invalidating the standards regarding directors and officers. The definition of "emergency" was alsorevised to limit the "anticipation" element to imminent situationswhich justify the extraordinary powers granted. See related ORS65.081, Model Act § 3.03.

(2) Effective Changes from Chapter 61 Provisions: There are norelevant provisions in existing ORS Chapter 61.

(3) Relationship to the Oregon Business Corporation Act: Thissection parallels provisions of the Business Corporation Act andwould generally give nonprofit organizations most of the flexibilityavailable to their for-profit counterparts.

ORS 60.064 of the Business Corporation Act does not explicitlyauthorize a board to amend or repeal emergency bylaws as does thisproposal, however, and it broadly phrases its authorization as towhat emergency bylaws may contain: "all provisions necessary...." That is broader than the Nonprofit Corporation Act'sproposed authorization ofprocedural changes. The Model Act language on that issue was adopted as more appropriate in light ofsubsection (2) which continues all the regular provisions not inconsistent with the emergency provisions and the fact that nonprofitcorporations, unlike business corporations, may lack an extra safeguard in that there may be no members in a nonprofit organizationto repeal or alter inappropriate emergency bylaws. ORS 60.064 alsodoes not contain the clarification concerning standard of care/immunity for emergency acts noted in part (1) of the comments,supra, but the proposal is otherwise parallel to ORS 60.064.

65.067 CORPORAnON SOLE

(1) Any individual may, in conformity with the constitution, ca-

40

ORS 65.074

nons, rules, regulations and disciplines of any church or religiousdenomination, form a corporation hereunder to be a corporationsole. Such corporation shall be a form of religious corporation andwill differ from other such corporations organized hereunder onlyin that it shall have no board of directors, need not have officers andshall be managed by a single director who shall be the individualconstituting the corporation and its incorporator or the successor ofthe incorporator.

(2) The name of such corporation shall be the same as the officewithin the church or religious denomination held by the incorporator, and shall be followed by the words "and successors, a corporation sole."

(3) All of the provisions of ORS 65.044 to 65.067 shall apply tosuch corporation. If the corporation has no officers, the directormay perform any act required by or permitted by an officer in thesame manner and with the same effect as though such act were performed by one or more officers of the corporation. [1989 c.1010§ 27]

OFFICIAL COMMENT TO ORS 65.067 (MODEL ACT § (NONE»

(1) Proposed Changes to the Model Act: The Model Act has no"corporation sole" provisions. They were added to accommodatethe unique structure of existing corporations sole, in which the incorporator or hislher successor in religious office serves as a soledirector and officer.

(2) Effective Changes from Chapter 61 Provisions: Certain erroneous cross-references have been corrected.

(3) Relationship to the Oregon Business Corporation Act: Nocomparable provision.

PURPOSES AND POWERS

65.074 PURPOSES

(1) Every corporation incorporated under this chapter has thepurpose of engaging in any lawful activity unless a more limitedpurpose is set forth in the articles of incorporation.

(2) A corporation that is subject to regulation under anotherstatute of this state may not be incorporated under this chapter ifsuch organization is required to be organized under such other statute. [1989 c.1010 § 28]

41

ORS 65.074


(1) Proposed Changes to the Model Act: Subsection (2) has beenreworded for consistency with the Oregon Business CorporationAct, which states the matter less restrictively than the Model Act,i. e., a corporation can be organized under this Act unless anotherregulatory provision specifically requires organization under otherprovisions.

(2) Effective Changes from Chapter 61 Provisions: ExistingORS 61.051 is not self-effectuating, i.e., does not grant any powersper se, but rather is only permissive. Consistent with the provisionsin Model Act § 2.02(d), ORS 65.047(4) does not require any powersto be stated in the articles. Existing law also limits the permissiblepurposes for a corporation organized under the Nonprofit Corporation Act by requiring that "none of (its purposes) is for profit." Therestriction, while a logical means to distinguish which corporationsshould organize under the Oregon Business Corporation Act andwhich should organize under this Act, was rejected as both too narrow and as unnecessary.

Modem nonprofits frequently engage in activities which, viewedindividually, are intended to generate income in excess of expensesin order to support their religious, charitable or mutual benefit functions. Bingo games, concerts, Christmas bazaars, and gift shops areamong the many common examples. While it is true that the organization's ultimate purpose is not "to generate a profit" but tosupport more fundamental goals, the current statutory language isboth confusing to laymen and unnecessary.

Mere incorporation under Chapter 61 does not entitle a corporation to any special tax breaks or other benefits. In light ofthe distribution restrictions of Chapters 13 and 14 in the Model Act, theelimination of the restriction on purposes should not result in forprofit entities trying to incorporate under Chapter 65. The TaskForce recognized that there might be some organizers of what essentially are business enterprises who may desire to use the Nonprofit Act purely for the publicity advantage of the term"nonprofit." It was felt, however, that the organizers would findthemselves so severely restricted in the use of any profit that theirscheme would be unworkable. Accordingly, the Task Force followed the Model Act on this issue and did not include a limitationon purposes.

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ORS 65.077

The third change from existing provisions is the explicit statement in subsection (2) of the circumstances governing availability ofthis Act for formation of regulated corporations. That restrictionwas not previously covered in ORS Chapter 61.

(3) Relationship to the Oregon Business Corporation Act: Subsection (1) of the proposal parallels ORS 60.074(1) with the exception that it uses the phrase "lawful activity" where the BusinessCorporation Act uses the term "lawful business," to reflect the latter's entrepreneurial character. Subsection (2) similarly followsORS 60.074(2) as it is proposed to be amended. The amendmenthas the effect of allowing organization under the Business Corporation Act unless another statute explicitly requires organizationunder some other statute.

65.077 GENERAL POWERS

Unless its articles of incorporation provide otherwise, every corporation has perpetual duration and succession in its corporatename and has the same powers as an individual to do all thingsnecessary or convenient to carry out its affairs, including, withoutlimitation, power to:

(1) Sue and be sued, complain and defend in its corporate name.(2) Have a corporate seal, which may be altered at will, and to

use it, or a facsimile of it, by impressing or affixing or reproducingit in any other manner.

(3) Make and amend bylaws not inconsistent with its articles ofincorporation or with the laws of this state, for regulating and managing the affairs of the corporation.

(4) Purchase, take by gift, devise or bequest, receive, lease orotherwise acquire, and own, hold, improve, use and otherwise dealwith, real or personal property or any interest in property, wherever located.

(5) Sell, convey, mortgage, pledge, lease, exchange, transfer andotherwise dispose of all or any part of its property.

(6) Purchase, receive, subscribe for or otherwise acquire, own,hold, vote, use, sell, mortgage, lend, pledge or otherwise dispose ofand deal in or with shares or other interests in or obligations of anyother entity.

(7) Make contracts and guarantees, incur liabilities, borrowmoney, issue notes, bonds and other obligations, and secure any of

43

P.

ORS 65.077

its obligations by mortgage or pledge of any of its property,franchises or income.

(8) Lend money, invest and reinvest its funds, and receive andhold real and personal property as security for repayment, exceptas limited by ORS 65.364.

(9) Be a promoter, partner, member, associate or manager of anypartnership, joint venture, trust or other entity.

(0) Conduct its activities, locate offices and exercise the powersgranted by this chapter within or without this state.

(11) Elect or appoint directors, officers, employees, and agents ofthe corporation, define their duties and fix their compensation, ifany.

(2) Pay pensions and establish pension plans, pension trusts andother benefit and incentive plans for any or all of its current orformer directors, officers, employees and agents.

(3) Unless otherwise provided in the articles of incorporation,make donations not inconsistent with law for the public welfare orfor charitable, benevolent, religious, scientific or educational purposes and for other purposes that further the corporate interest.

(4) Impose dues, assessments, admission and transfer fees uponits members.

(5) Establish conditions for admission of members, admit members and issue memberships.

(6) Carryon a business.(7) Do any other act, not inconsistent with law, that furthers

the activities and affairs of the corporation.(8) Dissolve, merge or reorganize as provided in this chapter.

[1989 c.1010 § 29]


(1) Proposed Changes to the Model Act: Grammatical and stylistic changes have been made in the lead paragraph, and in parts(2), (4), (6) and (17) for consistency with the Oregon Business Corporation Act.

A reference to acquisition by "gift, devise or bequest" has beenadded to item (4) from existing ORS Chapter 61 provisions as aclarification, since such acquisitions are common to nonprofit corporations. The word "other" has been added to item (6) to parallel

44

ORS 65.077

ORS Chapter 60 and clarify that in the case of nonprofits the provision does not deal with the corporation's own shares.

An explicit cross-reference to potential restrictions in the articleson donations has been added to part (13) from existing law becauseof donor sensitivity and legal restrictions on rechanneling donationsgiven with restricted purposes; the authorization of "benevolent"donations in item (13) has been retained from present law becauseits meaning is slightly different from other terms included in theModel Act. Item (18) has been retained from existing law (reworded) to avoid any inference of intended repeal of such powers.

(2) Effective Changes from Chapter 61 Provisions: The languageand format of the proposal follows the Oregon Business Corporation Act's corollary provision (ORS 60.077) rather than existingORS 61.061. In most cases, the substance remains unchanged.Archaic language (such as to "take" or "employ" property or surrender the corporation "franchise") has been updated, and redundancies have been eliminated (i.e., "property and assets" and"charitable and eleemosynary "). The illustrative list of kinds of obligations which may be dealt in has been subsumed in broader language ("shares or other interests in, or obligations of, any otherentity," a term which is broadly defined in ORS 65.001, Model Act§ 1.40).

The specific reference to the corporation's power to determine acceptable interest rates (found in ORS 61.061(8)) was deleted as unnecessary, in light of the other powers. ORS 60.06l(9)'sformulation of restrictions on lending (i.e., to those situations whichfurther "its corporate purposes") would be meaningless under theproposal's "any lawful activity" formulation of permissible purpose;it was replaced by cross-reference to the restrictions in ORS 65.364,Model Act § 8.32, on director/officer loans, as suggested in theModel Act. The present statute's restrictive reference to taking security to assure "repayment of funds so loaned or invested" is expanded by deleting the reference to loans or investments so that itclearly encompasses taking security for unpaid debts as well. Appointment power has been extended to cover directors and employees. Former provisions for pensions have been expanded to cover"other benefit and incentive plans" as well. Finally, the former section on donations (paragraph (13)) has been restricted by the clause"not inconsistent with other law," and reference to war time dona-

45

ORS 65.081

tions were deleted because they are subsumed in the concept of"public welfare" donations.

(3) Relationship to the Oregon Business Corporation Act: Thelead-in paragraphs parallel ORS 60.077(1) and (2). Throughout,the proposal refers to a corporation's "activities" rather than its"business," however. The reference to "gift" is not expressly contained in ORS 60.077(2)(d), nor is the word "transfer," which isfound in item (5) of the proposal. Both were included from theModel Act as appropriate powers, even though they may otherwisehave been covered in the catch-all provision (17).

Portions of ORS 60.077(2)(g) are omitted since nonprofit corporations will not have shares. Similarly, the reference in60.077(2)(m) to "share option plans" for pension plans has beendeleted as inappropriate to nonprofit corporations.

Part (8) adds a cross-reference to restrictions on loans which isnot found in Chapter 60. The provisions of ORS 60.077(2)(L) (specifically authorizing loans to directors, officers, employees andagents) have been deleted, although the general lending provisionswould permit them except to officers and directors for whom inclusion would be inconsistent with ORS 65.364, Model Act § 8.32.The appointment authority is expanded to include directors, sincetheir method of selection in nonprofit corporations may differ fromfor-profit corporations' mechanisms. Finally, the restrictions on donations found in part (13) of the proposal ("not inconsistent withlaw" or the articles) do not appear in the Business CorporationAct's corollary (ORS 60.077(2)(n)), but the proposal, unlike Chapter 60, does authorize religious donations in view of the religiouspurpose of many nonprofits. Parts (14) and (15) (regarding duesand memberships) and (18) (dissolution) have no counterparts inChapter 60 but are consistent with existing nonprofit law.

65.081 EMERGENCY POWERS

(1) During an emergency defined in subsection (4) of this section,the board of directors or a corporation may:

(a) Modify lines of succession to accommodate the incapacity ofany director, officer, employee or agent; or

(b) Relocate the principal office, designate alternative principaloffices or regional offices or authorize the officers to do so.

46

ORS 65.081

(2) During an emergency defined in subsection (4) of this section,unless emergency bylaws provide otherwise:

(a) Notice of a meeting of the board of directors need be givenonly to those directors whom it is practicable to reach and may begiven in any practicable manner, including by publication or radio;and

(b) One or more officers of the corporation present at a meetingof the board of directors may be deemed to be directors for purposes of the meeting, in order of the officer's rank, and within thesame rank in order of seniority, as necessary to achieve a quorum.

(3) Corporate action taken in good faith under this section tofurther the affairs of the corporation during an emergency binds thecorporation. A corporate director, officer, employee or agent shallnot be liable for deviation from normal procedures if the conductwas authorized by emergency powers provided in this chapter.

(4) An emergency exists for purposes of this section if a quorumof the corporation's directors cannot readily be assembled becauseof some present or imminent catastrophic event. [1989 c.l0l0 § 30]


(1) Proposed Changes to the Model Act: The proposed changesare technical clarifications for consistency with the Oregon BusinessCorporation Act, and to permit use of emergency powers in "anticipation" of an event but to limit their use to situations where theevent is imminent and likely to have disruptive effects justifyingthese extraordinary powers. The immunity for actions in an emergency is narrowed so that it is not absolute, but rather only protectsacts which conform to the specific special emergency powersgranted or otherwise proper.

(2) Effective Changes from Chapter 61 Provisions: The provisions waive existing notice, quorum and appointment procedures asmay be necessary to operate in the face of an actual or anticipated"catastrophic event." No authority on the subject is contained inpresent Oregon Nonprofit Corporation Law.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.081 with the exception of the clarification suggested for part (3) and the definition of emergency. SeeSection (1) of the comments.

(4) Other Comments: If all corporations used the power pro-

47

1

ORS 65.084

posed in ORS 65.064, Model Act § 2.07, to adopt emergency bylaws, this section might be unnecessary. Since many corporationswill fail to do so, and others may adopt inadequate provisions, thissection was felt to be appropriate, especially since many nonprofitcorporations' functions relate to medical care or emergency assistance. The broad authority to use the powers even "in anticipationof' an emergency seems appropriate since the panic attendant on aknown approaching disaster can be as disruptive as the actual disaster itself. A clarification of the definition of "emergency," limitingit to an imminent event, has been added to preclude abuse, however.

65.084 CHALLENGE OF CORPORATE AUTHORITY; REMEDY

(1) Except as provided in subsection (2) of this section, the validity of corporate action may not be challenged on the ground thatthe corporation lacks or lacked power to act.

(2) A corporation's power to act may be challenged:(a) In a proceeding by a member or members, a director or the

Attorney General against the corporation to enjoin the act;(b) In a proceeding by the corporation, directly, derivatively or

through a receiver, a trustee or other legal representative, includingthe Attorney General in the case of a public benefit corporation,against an incumbent or former director, officer, employee or agentof the corporation; or

(c) In a proceeding under ORS 65.664.(3) In a proceeding under paragraph (a) of subsection (2) of this

section to enjoin an unauthorized corporate act, the court may enjoin or set aside the act, if equitable and if all affected persons areparties to the proceeding, and may award damages for loss otherthan anticipated profits suffered by the corporation or anotherparty because of enjoining the unauthorized act. [1989 c.l0l0 § 31]


(1) Proposed Changes to the Model Act: Changes in format areproposed to conform this section to the Oregon Business Corporation Act, without altering the Model Act's general substance. However, the limitation in the Model Act § 3.04(b) ("where a thirdparty has not acquired rights") has been eliminated and a new section (c), taken from the Oregon Business Corporation Act and existing ORS 61.065, has been substituted to more clearly define when

48

ORS 65.094

injunctive relief can affect other parties' rights. A new provision(2)(c), cross-referencing the power to challenge corporate acts in adissolution proceeding, has been added.

(2) Effective Changes from Chapter 61 Provisions: The recognition of the Attorney General's power to act derivatively to imposedamages against directors, officers, employees and agents of publicbenefit corporations is new; explicit statement of his power to challenge unauthorized acts in a dissolution proceeding is also new inthis section but is consistent with powers presently expressed inORS 61.565(1)(c).

(3) Relationship to the Oregon Business Corporation Act: Theproposal follows the Oregon Business Corporation Act, substituting"member" for "shareholder," but uses the Model Act substantiveprovisions which also allow a director or the Attorney General toseek an injunction (since there may be no members) and recognizesthe Attorney General's right to sue directors, officers, agents or employees on behalf of a public benefit corporation.

NAME

65.094 CORPORATE NAME

(1) A corporate name may not contain language stating or implying that the corporation is organized for a purpose other than thatpermitted by ORS 65.074 and the articles of incorporation.

(2) A corporate name shall not contain the word "cooperative"or the phrase "limited partnership."

(3) A corporate name shall be written in the alphabet used towrite the English language but may include Arabic and Romannumerals and incidental punctuation.

(4) Except as authorized by subsection (5) of this section, a corporate name shall be distinguishable upon the records of the Officeof the Secretary of State from any other corporate name, professional corporate name, business corporate name, cooperative name,limited partnership name, business trust name, reserved name, registered corporate name or assumed business name of active recordwith the Office of the Secretary of State.

(5) The corporate name need not satisfy the requirement of subsection (4) of this section if the applicant delivers to the Office ofthe Secretary of State a certified copy of a final judgment of a court

49

1

I

ORS 65.094

of competent jurisdiction that finds that the applicant has a prior orconcurrent right to use the corporate name in this state.

(6) The provisions of this section do not prohibit a corporationfrom transacting business under an assumed business name.

(7) The provisions of this section do not:(a) Abrogate or limit the law governing unfair competition or un.

fair trade practices; or

(b) Derogate from the common law, the principles of equity orthe statutes of this state or of the United States with respect to theright to acquire and protect trade names. [1989 c.l0l0 § 32]

OFFICIAL COMMENT TO ORS 65.094 (MODEL ACT § 4.0 I)

(1) Proposed Changes to the Model Act: The Model Act has noprovisions precluding use of the word "cooperative," as required inboth Oregon's present Business Corporation Act and its NonprofitCorporation Law; the restriction has been added to avoid confusionwith organizations formed pursuant to ORS Chapter 62. A similarrestriction has been added with respect to the phrase "limited partnership," which is reserved for Chapter 70 organizations. TheModel Act has no restrictions on the symbols or characters used ina name; the proposal adds the same restrictions as presently applyto both for-profit and nonprofit corporations in Oregon.

The Model Act provisions are more restrictive than the proposalby prohibiting use of indistinguishable names of any corporationever incorporated or authorized to do business in the state; the proposed revision folIows the current Oregon Business CorporationAct and Nonprofit Corporation Law sections which limit the restriction to names "of active record with the office of the Secretaryof State." The proposal is more restrictive than the Model Act,however, by adopting the current Business Corporation Act andNonprofit Corporation Law sections which preclude use of namesof active record by any of a number of forms of organization (professional corporations, cooperatives, limited partnerships, and business trusts in addition to names recorded, registered or reserved bynonprofit and business corporations), and by restricting use ofnames indistinguishable from any assumed business name of activerecord, other than just those of foreign corporations unable to usetheir real name.

Technical language in ORS 65.094(5), Model Act subsection

50

ORS 65.097

(c)(2) (concerning judicialIy authorized uses), has been altered toconform to present Oregon Business Corporation Act and Nonprofit Corporation Law provisions. Model Act sections alIowinguse of a name acquired by consent, merger, reorganization orpurchase have been deleted as superfluous. Explicit provisions havebeen added paralleling the Oregon Business Corporation Act sections on the relationship between a name authorized under this section and rights based on the law of unfair trade practices orcommon law trade names. The same result is assumed in the ModelAct commentary but not explicitly addressed in its text.

(2) Effective Changes from Chapter 61 Provisions: Subsection(1) of the proposal is a new restriction not found in Chapter 61, asare the prohibitions on use of the phrase "limited partnership" anduse of any name that is misleading about the organization's limitedpurposes (where applicable). Otherwise, the proposal is identical toORS 60.094.

(3) Relationship to the Oregon Business Corporation Act: Theproposed provisions do not require nonprofit corporations to makeuse of "corporation," "incorporated," "company," "limited," ortheir abbreviations, as does ORS 60.094(1). Otherwise, except asnoted in (2) of these comments, the proposal is the same as the Oregon Business Corporation Act's section (ORS 60.094), which is currently incorporated in Chapter 61's provisions.

65.097 RESERVED NAME

(1) A person may apply to the Office of the Secretary of State toreserve a corporate name. The application must set forth the nameand address of the applicant and the name proposed to be reserved.

(2) If the Secretary of State finds that the corporate name applied for conforms to ORS 65.094, the Secretary of State shall re·serve the name for the applicant for a 120·day period, followingwhich the applicant may reapply for it on the same basis as otherapplicants.

(3) A person may transfer the reservation of a corporate name toanother person by delivering to the Office of the Secretary of Statea notice of the transfer executed by the person for whom the namewas reserved and specifying the name and address of the transferee.[1989 c.l0l0 § 33]

51

r

•

ORS 65.101


(1) Proposed Changes to the Model Act: Current Oregon Business Corporation and Nonprofit Corporation Law sections havebeen substituted for the Model Act provisions both for uniformityand to avoid the Model's inappropriate use of terms such as"owner" and "exclusive." The substance is basically unchangedfrom the Model Act, as interpreted by its commentary, however,with the following exception: the Model Act's description of the120-day reservation period as "nonrenewable" has not been included because it is misleading and ambiguous. If the intent were topreclude holding a name for more than 120 days, a person couldeasily avoid the prohibition against his renewal of a reservation byhaving someone else file a new reservation and transfer it to him. Itis apparent from the comments to the Model Act that all that isintended is that the original holder cannot be assured of continuityor priority but after the 120 days must reapply and take his chances.That is the present law in Oregon as well. It was felt that use of theterm "nonrenewable" for that concept is apt to confuse and prejudice many applicants. A more explicit clause concerning reapplication has been substituted.

(2) Changes from Chapter 61 Provisions: Only the clarificationconcerning reapplication (rather than "renewal") is different. Thatchange was requested by the Corporation Division, to reflect thelack of priority in the prior holder after the reserved period expires.

(3) Relationship to the Oregon Business Corporation Act: Theproposal is identical to ORS 60.097 except as noted in part (2) ofthese comments.

65.101 REGISTERED NAME

(1) A foreign corporation may apply to the Office of the Secretary of State to register its corporate name.

(2) The application must set forth the corporate name, the stateor country of its incorporation, the date of its incorporation, a briefdescription of the nature of the activities in which it is engaged anda statement that it is not carrying on or doing business in the Stateof Oregon. The application must be accompanied by a certificate ofexistence or a document of similar import current within 60 days ofdelivery, duly authenticated by the official having custody of corpo-

52

ORS 65.111

rate records in the state or country under whose law it isincorporated.

(3) If the Secretary of State finds that the name conforms toORS 65.094, the Secretary of State shall register the name effective for one year.

(4) A foreign corporation whose registration is effective may renew it for successive years by delivering to the Secretary of Statefor filing a renewal application which complies with the requirements of this section prior to the lapse of the previous registration.Filing of the renewal application renews the registration for an additional year from its prior expiration.

(5) A foreign corporation whose registration is effective maythereafter qualify to do business in this state as a foreign corporation under that name or transfer the registered name to anotherapplicant for the name by the procedures provided in ORS 65.097(3) with respect to reserved names. Filing of such a consent terminates the prior registration and operates as a reservation in thename of the transferee, if it does not simultaneously file under thatname. [1989 c.l0l0 § 34]


(1) Proposed Changes to the Model Act: The Model Act's restatement of material found in ORS 65.094, Model Act § 4.01 (fordomestic corporations) and ORS 65.717, Model Act § 15.06 (forforeign corporations) was felt to be unnecessary and potentiallydangerous, since an integrated system is feasible only if all parts aresubject to the identical rules. The provisions of Oregon's BusinessCorporation Act have been substituted for those of the Model Act.

(2) Effective Changes from Chapter 61 Provisions: None. Theproposal is identical to ORS 60.101, already incorporated by reference in ORS 61.081.

(3) Relationship to the Oregon Business Corporation Act: Identical to ORS 60.101, except for the addition of subsections (4) and(5).

OFFICE AND AGENT

65.111 REGISTERED OFFICE AND REGISTERED AGENT

Each corporation shall continuously maintain in this state both:(1) A registered agent, who shall be:

53

ORS 65.114

(a) An individual who resides in this state;(b) A domestic business or nonprofit corporation with an office in

this state; or(c) A foreign business or nonprofit corporation authorized to

transact business in this state with an office in this state; and(2) A registered office of the corporation, which shall be the resi

dence or office address of the registered agent. [1989 c.1010 § 35]


(1) Proposed Changes to the Model Act: The title to this sectionwas corrected to reflect its true subject. The provisions concerningqualification to serve as agent were made mandatory (as was probably intended by the Model Act drafters), which is consistent withthe Oregon Business Corporation Act. The provisions have alsobeen reworded to eliminate the inference that either a nonprofit corporation or its agent must have an actual "office," since nonprofitcorporations and their agents frequently do not.

(2) Effective Changes from Chapter 61 Provisions: The existingOregon statute does not expressly permit a location other than abusiness office to be the registered office; the proposal does.

(3) Relationship to the Oregon Business Corporation Act: ORS60.111 expressly provides for "a registered agent and registered office that may be, but need not be, the same as any of its places ofbusiness." Because the agent must be at the "registered office,"however, and many nonprofit corporations do not have either aplace of business or an office, the proposal expressly allows use ofthe agent's residence address.

65.114 CHANGE OF REGISTERED OFFICE OR REGISTERED AGENT

(1) A corporation may change its registered office or registeredagent by delivering to the Office of the Secretary of State for filinga statement of change that sets forth:

(a) The name of the corporation;(b) If the current registered office is to be changed, the address,

including the street and number, of the new registered office;(c) If the current registered agent is to be changed, the name of

the new registered agent and a statement that the new agent hasconsented to the appointment; and

(d) A statement that after the change or changes are made, the

54

ORS 65.114

street addresses of its registered office and the office or residenceaddress of its registered agent will be identical.

(2) If the registered agent changes the street address of theagent's designated office or residence, the registered agent shallchange the street address of the registered office of any corporationfor which the registered agent is the registered agent by notifyingthe corporation in writing of the change and by signing, either manually or in facsimile, and delivering to the Office of the Secretary ofState for filing a statement that complies with the requirements ofsubsection (1) of this section and recites that the corporation hasbeen notified of the change.

(3) The filing by the Secretary of State of a statement submittedunder this section shall terminate the existing registered office oragent, or both, on the effective date of the filing and establish thenewly appointed registered office or agent, or both, as that of thecorporation. [1989 c.1010 § 36]


(1) Proposed Changes to the Model Act: The Model Act hasbeen revised for consistency with the parallel provisions of the Oregon Business Corporation Act, which does not require informationabout the previous address and agent, makes the notice of addresschange in subsection (2) mandatory, and contains a provision concerning the effect of a notice.

Unlike the Model Act, the proposal requires a statement that anew agent has consented to serve but does not require evidence ofconsent of the new agent. In that respect, it follows the OregonBusiness Corporation Act. The penalties for false statements indocuments submitted for filing (ORS 65.990, Model Act § 1.29)should be sufficient to assure the accuracy of that representation.

(2) Effective Changes from Chapter 61 Provisions: Chapter 61presently incorporates the Oregon Business Corporation Act section by reference. See part (3) of the Comments.

(3) Relationship to the Oregon Business Corporation Act: A departure is made from the Oregon Business Corporation Act in(1)(d) and (2) to reflect the differences between ORS 65.111 (ModelAct § 5.01) and its Oregon Business Corporation counterpart (ORS60.111)--i.e., that a nonprofit corporation and its agent need nothave a true "office," and may use the agent's residence address.

55

r'

ORS 65.117

65.117 RESIGNATION OF REGISTERED AGENT

(1) A registered agent may resign as registered agent upon delivering a signed statement to the Office of the Secretary of State forfiling. The statement may include a statement that the registeredoffice is also discontinued.

(2) After filing the statement, the Secretary of State shall immediately mail the copy to the corporation at its principal office asshown in the most recent annual report filed pursuant to ORS65.787 or if none, the address specified in the articles ofincorporation.

(3) The agency appointment is terminated, and the registered office discontinued if so provided, on the 31st day after the date onwhich the statement was filed by the Secretary of State, unless thecorporation shall sooner appoint a successor registered agent asprovided in ORS 65.114 thereby terminating the capacity of theprior agent. [1989 c.1010 § 37]


(1) Proposed Changes to the Model Act: Technical changes forconsistency with the Oregon Business Corporation Act specify delivery to the office of the Secretary, not the Secretary per se, requirethe Secretary to take action "immediately," and provide for earlyeffect of a notice when a successor is named before the 30 days run.

By eliminating names and addresses of directors from the articlesand not requiring designation of any "principal office" in incorporation documents, the Model Act (without revision) would leave theSecretary no effective contact point for a new corporation if theagent resigns and discontinues the registered office before an annualreport is filed. That problem was solved by departing from theModel Act and following the Oregon Business Corporation Act inORS 65.047(1)(e), which requires designation of a "principal office"in the articles of incorporation. A cross~reference to the designationin the articles has been added to subsection (2).

The provisions in the Model Act's subsection (a) for the agent todeliver two copies of the notice to the Secretary's office, and in subsection (b) for the Secretary to mail one of them back to the registered office, have been rejected. Unless a successor agent isappointed virtually simultaneously, that act would only result in returning the notice to its sender. Even if the new agent is simultane-

56

ORS 65.121

ously appointed, notice to him of the change is superfluous sinceappointment of a successor can only have occurred with his consentin any event. See ORS 65.114(1)(c), Model Act, and the OregonBusiness Corporation Act's language.

(2) Effective Changes from Chapter 61 Provisions: Chapter 61currently incorporates the provisions of the Oregon Business Corporation Act. See part (3) of the comments.

(3) Relationship to the Oregon Business Corporation Act: Theproposal, as revised, parallels the Oregon Business Corporation Actin all respects. However, this assumes no procedural difference between "notify" and "mailing"; compare ORS 65.117(2) and ORS60.117(2).

65.121 SERVICE ON THE CORPORATION

The provisions of ORS 60.121 shall apply to corporations organized under or subject to the provisions of this chapter. [1989 c.1010§ 38; 1991 c.67 § 12]


(1) Proposed Changes to the Model Act: The service provisio~s

of the Model Act differ substantially from those of the Oregon BUSIness Corporation Act (which is incorporated by reference in thepresent ORS Chapter 61) by providing for service on the "principaloffice" in lieu of the registered agent. As noted in earlier comments,nonprofit corporations are especially unlikely to have ~uch an o~c.e,

as they are defined in the unrevised Model Act-leavmg a plamtlffwithout a remedy when the registered agent has resigned. The Oregon Business Corporation Act allows substituted service on the Secretary of State after efforts to locate a corporate representative foractual notice have been tried and failed; those provisions areadopted here.

Model Act provisions concerning the effective date of service arealso deleted both for consistency with the Oregon Business Corporation Act and to avoid inadvertent conflict with rules of civil procedure, which cover that subject in detail.

(2) Effective Changes from Chapter 61 Provisions: None.(3) Relationship to the Oregon Business Corporation Act: Identi

cal provisions; see part (1) of the comments.

57

E'

ORS 65.131


(ADMISSION OF MEMBERS)

65.131 ADMISSION

(1) The articles or bylaws may establish criteria or proceduresfor admission of members.

(2) No person shall be admitted as a member without consent ofthe person, express or implied. [1989 c.l0l0 § 39]


(1) Proposed Changes to the Model Act: The commentary to theModel Act states that consent may be express or implied. The proposal puts this into the statutory language, because the term "consent" alone might suggest that express consent is required. Thechange clarifies for lay persons that an affirmative act of consent isnot required to be admitted as a member; consent can be impliedfrom the circumstances.

(2) Effective Changes from Chapter 61 Provisions: While ORS61.091, corresponding to ORS 65.144 (Model Act § 6.10), permitsestablishing differences in rights and obligations of classes of members, no provision in current law states that the articles or bylawsmay define who members are or how they may be admitted. Theprovision requiring consent of a member before admission makesmembership a bilateral relationship.


(4) Other Comments: Subsection (2) derives from CaliforniaNonprofit Corporation Law §§ 5350(b) (public benefit), 7350(b)(mutual benefit), and 9350(b) (religious), although the CaliforniaAct only prohibits imposing the obligations of membership withoutconsent and does not prohibit imposing membership withoutconsent.

65.134 CONSIDERATION

Except as provided in its articles or bylaws, a corporation mayadmit members for no consideration or for such consideration as isdetermined by the board. [1989 c.l0l0 § 40]

58

ORS 65.144


(1) Proposed Changes to the Model Act: None.(2) Effective Changes from Chapter 61 Provisions: The proposal

makes clear that no consideration is required for membership andthat establishing the amount of consideration is to be done by theboard from time to time.


(4) Other Comments: Section 6.02 of Model Act is based onCalifornia Nonprofit Corporation Law §§ 5311 (public benefit),7311 (mutual benefit), and 9311 (religious).

65.137 No REQUIREMENT FOR MEMBERS

A corporation is not required to have members. A corporationshall have no members if its articles of incorporation or bylaws include a statement that "the corporation shall have no members" orwords of similar import. [1989 c.l0l0 § 41]


(1) Proposed Changes to the Model Act: The first sentence ofthe proposal has a different meaning from the Model Act in light ofthe expanded definition of membership in ORS 65.001(23) as compared with Model Act § 1.40. The second sentence is intended tocarry over from ORS 61.091 the provisions allowing nonprofit corporations to have no members if their articles or bylaws so state.

(2) Effective Changes from Chapter 61 Provisions: None.(3) Relationship to the Oregon Business Corporation Act: The

nonprofit statute is the opposite of ORS 60.131 (1), which requires abusiness corporation to have shares, and ORS 60.131(2), which requires one or more classes of shares to have unlimited voting rights.

(MEMBERS' RIGHTS AND OBLIGATIONS)

65.144 DIFFERENCES IN RIGHTS AND OBLIGATIONS OF MEMBERS

All members shall have the same rights and obligations with respect to voting, dissolution, redemption and transfer, unless the articles or bylaws establish classes of membership with differentrights or obligations. All members shall have the same rights and

59

ORS 65.147

obligations with respect to any other matters, except as set forth inor authorized by the articles or bylaws. [1989 c.1010 § 42]


(1) Proposed Changes to the Model Act: The proposal adoptsthe Model Act language but has a different meaning in light of theexpanded definition of membership in ORS 65.001(23) as comparedwith Model Act § 1.40. If the corporation has different classes ofmembers, the articles or bylaws must identify which class is entitledto vote on each matter with regard to which members have the rightto vote. For instance, a person entitled to vote on amendments tothe articles of incorporation is a member with voting privileges andis entitled to vote on organic transactions, unless such member'svoting rights are limited.

(2) Effective Changes from Chapter 61 Provisions: Current lawauthorizes classes of members but does not expressly state that inthe absence of classes, members are equal. Under the proposal, unl~ss there are classes of members, all members have the same votingnghts, and all members are equal with regard to dissolution, redemption, and transfer.

The proposal makes clear which distinctions among members establish a "class": differences with respect to voting, dissolution, redemption, or transfer. See the definition of "class" in ORS65.001(6), Model Act § 1.40.

(3) Relationship to the Oregon Business Corporation Act: ORS60.131 is similar in general approach. There is no counterpart toORS 60.131(2), which requires there to be one or more classes withunlimited voting rights. Nor is there any counterpart to ORS60.134, which allows the terms of a class or series to be determinedby the board of directors.

(4) Other Comments: Although this provision provides flexibility where needed, most corporations with members will not haveclasses. Unless there are classes of members, all members are equalwith regard to voting.

65.147 TRANSFERS

(1) Except as provided in ORS 65.231 pertaining to proxies or asset forth in or authorized by the articles or bylaws, no member maytransfer a membership or any right arising therefrom.

60

ORS 65.147

(2) No member of a public benefit or religious corporation maytransfer for value a membership or any right arising therefrom, unless the transferring member is a public benefit or religiouscorporation.

(3) Where transfer rights have been provided, no restriction onthem shall be binding with respect to a member holding a membership issued prior to the adoption of the restriction unless the restriction is approved by the members and the affected member.[1989 c.1010 § 43]


(1) Proposed Changes to the Model Act: The proposal wouldprohibit transferring a membership in a public benefit or religiouscorporation for value, while the Model Act would prohibit suchtransfers entirely. The reasons given in the Model Act commentaryfor so broad a prohibition are not persuasive. One reason is thatmemberships in public benefit and religious corporations are "notsecurities" and "should not be sold for value," but these reasons toprohibit profit-seeking (which is alien to membership in such corporations) do not apply to all transfers.

Transfer of memberships may be a way to change the sponsorshipof a public benefit corporation. Where members have the right toelect directors, the members' control over the business and assets ofthe nonprofit corporation is similar to the stockholders' controlover those of the business corporation. Just as control over a business corporation can be gained through stock acquisition, controlover a nonprofit corporation can be obtained through voting power.When an entity obtains the right to appoint or remove a nonprofitcorporation's directors, the event is referred to as a change of sponsorship or membership. Affiliation between one nonprofit corporation and one or more other nonprofit corporations is often donethrough gaining control of membership voting rights. Sponsorshipor affiliation may be effectuated through transferring the rights ofone or more voting members that have the power to elect the entireboard of directors.

For public benefit or religious corporations, the only restrictionthat the proposal would impose is that the transfer cannot be forvalue. The Model Act commentary argues that gift of membershipsshould be prohibited, because this would pass membership rights

61

ORS 65.147

without regard to the qualifications of the new members. In fact, asstated in ORS 65.131(1), Model Act § 6.01(a), the corporation mayestablish qualifications for admission of members which would apply equally upon transfer.

There can be valid noncommercial reasons for transferring membership in public benefit or religious corporations. For example,membership in a religious corporation may be familial or may passfrom generation to generation. A public benefit or religious corporation may be controlled by a sole corporate member, and assignment of the membership may be consistent with public benefit orreligious status.

The limitation on a public benefit or religious corporation transferring membership rights for value does not apply if the member isa public benefit or religious corporation. The same change has beenmade to ORS 65.171, Model Act § 6.22, regarding purchase ofmemberships.

ORS 65.231, Model Act § 7.24, authorizes proxy voting, unlessthe articles or bylaws provide otherwise. Proxy voting transfers aright arising from membership. Therefore ORS 65.231, Model Act§ 7.24 (pertaining to proxies), is carved out as an exception to therule requiring authority for transfers of membership rights to be inthe articles or bylaws.

(2) Effective Changes from Chapter 61 Provisions: Current lawpermits issuing "certificates evidencing membership" but prohibitsissuing "shares of stock." This does not clarify whether memberships are transferable.

Subsection (1) establishes that transfer rights must be in the articles or bylaws. This may require some corporations to amend theirarticles or bylaws but should not upset existing expectations unduly.Most nonprofit corporations probably do not permit membershipsto be transferred, and most of those that do probably already have aprovision in their articles or bylaws.

Subsection (2) establishes that no transfer of membership rightsin a public benefit or religious corporation can be for value, exceptwhere the member is another public benefit or religious corporation.Subsection (3) requires members' consent to changes in transferrights.

(3) Relationship to the Oregon Business Corporation Act: Subsection (3) is comparable to ORS 60.167(1).

62

ORS 65.154

(4) Other Comments: The proposal substantially follows California's Nonprofit Corporation Law §§ 5320 (public benefit), 7320(mutual benefit), and 9320 (religious).

65.151 MEMBER'S LIABILITY TO THIRD PARTIES

A member of a corporation is not personally liable for the acts,debts, liabilities or obligations of the corporation merely by reasonof being a member. [1989 c.l0l0 § 44]


(1) Proposed Changes to the Model Act: Changes have beenmade to parallel ORS Chapter 60.

(2) Effective Changes from Chapter 61 Provisions: Current lawhas no comparable provision. The closest provision, ORS 61.940,applies primarily to preincorporation transactions.

(3) Relationship to the Oregon Business Corporation Act: Thestatute as enacted is substantively identical to ORS 60.151 (2), substituting "member" for "shareholder."

(4) Other Comments: ORS 61.940 derives from the originalModel Nonprofit Corporation Act § 11 but omits the last sentenceof § 11, which reads: "The directors, officers, employees and members of the corporation shall not, as such, be liable on its obligations." The Revised Model Act derives from California NonprofitCorporation Law §§ 5050(a) (pUblic benefit), 7350(a) (mutual benefit), and 9350(a) (religious).

65.154 MEMBER'S LIABILITY FOR DUES, ASSESSMENTS AND FEES

A member may become liable to the corporation for dues, assessments or fees. An article or bylaw provision or a resolution adoptedby the board authorizing or imposing dues, assessments or fees doesnot, of itself, create liability to pay the obligation, but nonpaymentmay constitute grounds for expelling or suspending the member orsuspending or terminating the membership. [1989 c.l0l0 § 45]


(1) Proposed Changes to the Model Act: An increase in dues,assessments or fees to which a member has not consented is groundsfor loss of membership. Continued membership can be conditionedupon payment of such obligations.

63

ORS 65.157

(2) Effective Changes from Chapter 61 Provisions: Under current law, the corporation's power to impose dues, assessments andfees is not spelled out but is presumably a general power under ORS61.061. The proposal establishes that members may become liableto the corporation, although not through unilateral action of thecorporation. As with ORS 65.144, Model Act § 6.10, this presupposes that membership is a bilateral relationship. Members shouldnot become liable for dues without their consent. Amending articles and bylaws should not be enough to impose liability for increased or new dues, or assessments.

(3) Relationship to the Oregon Business Corporation Act: ORS60.147(4) provides that once the consideration for shares is receivedby the corporation, shares are fully paid and non-assessable. ORS60.151(l) provides that a purchaser of shares is not liable to thecorporation except to pay for the shares.

(4) Other Comments: This provision derives from CaliforniaNonprofit Corporation Law §§ 5351 (public benefit), 7351 (mutualbenefit), and 9351 (religious).

There is potential contract liability of members who agree to payfees and assessments regardless of increases. In such a situation thecorporation would have a claim for breach of contract against amember who refused to pay. Absent such a prior agreement, theremedy of the corporation is probably limited to termination of themembership, expulsion or suspension. The procedure for expellingor suspending a member is in ORS 65.167, Model Act § 6.21.

65.157 CREDITOR'S AcrION AGAINST MEMBER

(1) No proceeding may be brought by a creditor to reach the liability, if any, of a member to the corporation arising from membership unless final judgment has been rendered in favor of the creditoragainst the corporation and execution has been returned unsatisfiedin whole or in part or unless obtaining such judgment and executionwould be useless.

(2) All creditors of the corporation, with or without reducingtheir claims to judgment, may intervene in any creditor's proceeding brought under subsection (1) of this section to reach and applyunpaid amounts due the corporation. Any or all members who oweamounts to the corporation arising from membership may be joinedin such proceeding. [1989 c.10l0 § 46]

64

ORS 65.164


(1) Proposed Changes to the Model Act: The protection ofmembers against creditors' actions applies only to obligations arising from membership. This clarifies that arms-length liabilities notarising out of membership are not covered. An ambiguity in theterm "proceeding" has been corrected. An action against a memberis permitted only if the attempt to obtain satisfaction from the corporation would be useless. This section is not intended to excusecreditors from obtaining a final judgment against the corporationbecause they believe the judgment would be useless.

(2) Effective Changes from Chapter 61 Provisions: This newprovision protects a member from a creditor's action if the corporation has sufficient assets to meet the obligation. It does not altercurrent law regarding piercing the corporate veil.

(3) Relationship to the Oregon Business Corporation Act: ORSChapter 60 has no comparable provision.

(4) Other Comments: This provision derives from CaliforniaNonprofit Corporation Law §§ 5352 (public benefit), 7353 (mutualbenefit), and 9352 (religious). This section is intended to complement rather than displace general rules of civil and bankruptcyprocedure.

(RESIGNATION AND TERMINATION)

65.164 RESIGNATION

(1) A member may resign at any time.(2) The resignation of a member does not relieve the member

from any obligations the member may have to the corporation as aresult of obligations incurred or commitments made prior to resignation. [1989 c.l0l0 § 47]


(1) Proposed Changes to the Model Act: None.(2) Effective Changesfrom Chapter 61 Provisions: The proposal

establishes that the corporation cannot prevent a member from resigning, but the member cannot escape liabilities by doing so.


(4) Other Comments: The power of a member to resign is the

65

1

ORS 65.167

counterpart ofORS 65.131(2), Model Act § 6.01(b), which requiresconsent of a person for admission to membership. While resignation will not relieve a member of liabilities arising prior to resignation, the existence of the liabilities to third-parties is governed byORS 65.151 and 65.154, Model Act §§ 6.12 and 6.13. This provision derives from California Nonprofit Corporation Law §§ 5340(public benefit), 7340 (mutual benefit), and 9340 (religious).

65.167 TERMINATION, EXPULSION OR SUSPENSION

(1) No member of a public benefit or mutual benefit corporationmay be expelled or suspended, and no membership or membershipsin such corporations may be terminated or suspended except pursuant to a procedure which is fair and reasonable and is carried out ingood faith.

(2) A procedure is fair and reasonable when either:(a) The articles or bylaws set forth a procedure which provides:(A) Not less than 15 days' prior written notice of the expulsion,

suspension or termination and the reasons therefor; and(B) An opportunity for the member to be heard, orally or in writ

ing, not less than five days before the effective date of the expulsion, suspension or termination by a person or persons authorizedto decide that the proposed expulsion, termination or suspensionnot take place; or

(b) It is fair and reasonable taking into consideration all of therelevant facts and circumstances.

(3) Any written notice given by mail must be given by first classor certified mail sent to the last address of the member shown onthe corporation's records.

(4) Any proceeding challenging an expulsion, suspension or termination, including a proceeding in which defective notice is alleged, must be commenced within one year after the effective dateof the expulsion, suspension or termination.

(5) A member who has been expelled or suspended, or whosemembership has been suspended or terminated, may be liable to thecorporation for dues, assessments or fees as a result of obligationsincurred by the member prior to expulsion, suspension or termination. [1989 c.1010 § 48]

66

ORS 65.171


(1) Proposed Changes to the Model Act: ORS 65.167(2)(a)(A)corrects a grammatical error in Model Act § 6.21(b)(1)(i). Subsection (5) sharpens the language of Model Act § 6.21(e) and expandsit to cover suspension or termination of membership, in order toparallel the other subsections.

(2) Effective Changes from Chapter 61 Provisions: Because current law has no provision, a contest might arise over the power of acorporation to expel or suspend a member or suspend or terminatea membership. The proposal is intended to codify the requirementsjudicially developed in other jurisdictions.


(4) Other Comments: This provision derives from CaliforniaNonprofit Corporation Law §§ 5341 (public benefit) and 7341 (mutual benefit).

65.171 ACQUIRING MEMBERSHIPS

(1) A public benefit or religious corporation may not acquire forvalue any of its memberships or any right arising therefrom, unlessthe member is a public benefit or religious corporation.

(2) A mutual benefit corporation may acquire the membership ofa member who resigns or whose membership is terminated for theamount and pursuant to the conditions set forth in or authorized byits articles or bylaws.

(3) No acquisition of memberships shall be made in violation ofORS 65.551 or 65.554. [1989 c.1010 § 49]


(1) Proposed Changes to the Model Act: The proposal permitsacquiring a membership in a public benefit or religious corporationif the member itself is a public benefit or religious corporation. Thischange parallels one in ORS 65.147(2) as compared with Model Act§ 6.1 1(b), regarding transfers of membership for value. If a membership may be acquired only by a corporation that is subject to thesame restrictions that apply to the original corporation, the membership should not be viewed as a "security" that is bought and soldfor profit. The last sentence of the section, which is a reminder that

67

ORS 65.174

acquisition of memberships cannot violate the limitations on distributions, is expanded to cover the entire section.

The term "purchase" has negative connotations for tax-exemptnonprofits. The term may make it appear to some that nonprofitsare buying and selling shares like business corporations, althoughthis would not be the case. Accordingly, the proposal replaces theterm "purchase" with the term "acquire for value" throughout thesection.

(2) Effective Changes from Chapter 61 Provisions: ORS 61.165restricts dividends and payments of income to members but doesnot speak directly to purchase of memberships. The proposal distinguishes between memberships in public benefit or religious corporations, which may not be purchased except in limitedcircumstances, and memberships in mutual benefit corporations,which may be purchased more generally.

(3) Relationship to the Oregon Business Corporation Act: ORS60.177, governing a business corporation's acquisition of its ownshares, is a distant cousin.

(4) Other Comments: The proposal is connected with ORS65.147(2), Model Act § 6. 11(b), prohibiting transfer for value ofmembership in a public benefit or religious corporation, and ORS65.554, Model Act § 13.02, restricting distributions. Subsection (2)derives from California Nonprofit Corporation Act § 7332.

(DERIVATIVE SUITS)

65.174 DERIVATIVE SUITS

(1) A proceeding may be brought in the right of a domestic orforeign corporation to procure a judgment in its favor by:

(a) Any member or members having two percent or more of thevoting power or by 20 members, whichever is less; or

(b) Any director.(2) In any such proceeding, each member complainant shall have

been a member when the transaction complained of occurred.(3) A complaint in a proceeding brought in the right of a corpora

tion must allege with particularity the demand made, if any, to obtain action by the board of directors and either that the demand wasrefused or ignored or why a demand was not made. Whether or nota demand for action was made, if the corporation commences an

68

ORS 65.174

investigation of the charges made in the demand or complaint, thecourt may stay any proceeding until the investigation is completed.

(4) The complainants shall notify the Attorney General within 10days after commencing any proceeding under this section if the proceeding involves a public benefit corporation or assets held in charitable trust by a mutual benefit corporation.

(5) A proceeding commenced under this section may not be discontinued or settled without the court's approval. If the court determines that a proposed discontinuance or settlement willsubstantially affect the interest of the corporation's members or aclass of members, the court shall direct that notice be given themembers affected. [1989 c.l0l0 § 50]


(1) Proposed Changes to the Model Act: The standing thresholds in subsection (1) have been reduced to two percent or 20 members. Changes have been made in subsections (2) and (3) to parallelORS 60.261(1) and (2). Because subsection (2) has been altered torefer to the time the transaction occurred, reference to directors hasbeen dropped. New subsection (5) parallels ORS 60.261(3).

Because ORS 60.261 omitted a provision for expenses for defending against frivolous suits, the proposal omits the comparable subsection of the Model Act. Model Act subsection (e) has also beenomitted, since it could unduly encourage derivative proceedings.

Because of the broader definition of "member," the right to bringa derivative suit is not necessarily limited to members with the rightto vote for directors.

(2) Effective Changes from Chapter 61 Provisions: While Oregon has no general statutory provision for members' derivative actions in the right of a nonprofit corporation, a court would likelyrecognize such an action. ORS 65.174, Model Act § 6.30, wouldcodify the procedure for derivative suits; it would not create authority for a suit that would be unavailable absent the statute. Requiring two percent or more of the voting power of the membership tobring a derivative action would be a threshold test that would minimize the problem of nuisance suits but is not an insuperable barrierfor plaintiffs.

The courts of at least five states - New Jersey, New York, Delaware, Louisiana, and Tennessee - have allowed derivative suits by

69

ORS 65.174

the members of nonprofit corporations even in the absence of a specific statute. At least one case has recognized the right of non-voting members to bring a derivative suit. At least two states Washington and Colorado - have allowed derivative suits bystockholders of nonprofit mutual benefit corporations, in thosecases water supply corporations.

Commentators recommend extending the remedy of a derivativeaction to members of nonprofit corporations. They indicate thatwhile statutes may regulate and occasionally preempt the commonlaw action, a statute has never been thought necessary in order toauthorize a derivative action. Indeed, the derivative suit predatedderivative suit statutes.

ORS Chapter 61 has no general provision governing derivativeactions involving nonprofit corporations. However, ORS 61.065(2)authorizes "members in a representative suit" to bring "a proceeding by the corporation" to assert ultra vires against present or former officers or directors. ORS 61.205(2), which authorizesindemnity in an "action or suit by or in the right of the corporation," implies the possibility of a derivative suit.

(3) Relationship to the Oregon Business Corporation Act: ORS60.261 now governs shareholders' derivative proceedings in theright of business corporations. Prior to 1987, Oregon had no statute on derivative proceedings. Indeed, Oregon was the only statethat had neither a procedural nor a substantive statute governingderivative proceedings for general business corporations.

Despite lack of a statute, Oregon had developed a fairly extensivejurisprudence of shareholder derivative proceedings. The Oregoncourts appear to view the derivative proceeding as an equitable action that does not require statutory creation.

Subsections (2), (3), and (5) of the proposal are similar to ORS60.261. Chapter 60 has no counterpart to subsections (1) (standingto bring derivative suit) or (4) (notice to attorney general). In contrast to ORS 60.261(1), paragraph (1)(b) grants directors standingto bring a derivative suit.

(4) Other Comments: The Oregon Rules of Civil Procedurehave no provision on derivative suits. The Federal Rules of CivilProcedure specifically apply to a derivative action brought by members. FRCP 23.1. The federal rule assumes that members' derivative actions are on par with shareholders' derivative actions.

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ORS 65.177

Because Attorney General enforcement is available against charitable corporations, one might query whether members' derivativesuits are also needed. In fact, members' derivative actions havebeen allowed even in cases where the Attorney General or someother party may have standing to sue. Concurrent standing makessense because even with a charitable corp.1ration, the injury to thecorporation of which the members complain through a derivativesuit may not be a breach of charitable trust that the Attorney General would pursue.

(DELEGATES)

65.177 DELEGATES

(1) A corporation may provide in its articles or bylaws for delegates having some or all of the authority of members.

(2) The articles or bylaws may set forth provisions relating to:(a) The characteristics, qualifications, rights, limitations and ob

ligations of delegates including their selection and removal;(b) Providing notice to and calling, holding and conducting meet

ings of delegates; and(c) Carrying on corporate activities during and between meetings

of delegates. [1989 c.1010 § 51]


(1) Proposed Changes to the Model Act: None.(2) Effective Changesfrom Chapter 61 Provisions: No compara

ble provision. The purpose of this section is to give statutory credibility to a category presently used by a number of nonprofitcorporations. Delegates typically represent discrete interests andoften have some or all of the authority of members.


(4) Other Comments: This provision derives from CaliforniaNonprofit Corporation Law §§ 5152 (public benefit), 7152 (mutualbenefit), and 9152 (religious).

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ORS 65.201


(MEETINGS AND ACTION WITHOUT MEETINGS)

65.201 ANNUAL AND REGULAR MEETINGS

(1) A corporation with members shall hold a membership meeting annually at a time stated in or fixed in accordance with thebylaws.

(2) A corporation with members may hold regular membershipmeetings at the times stated in or fixed in accordance with thebylaws.

(3) Annual and regular membership meetings may be held in orout of this state at the place stated in or fixed in accordance withthe bylaws.If no place is stated in or fixed in accordance with thebylaws, annual and regular meetings shall be held at the corporation's principal office.

(4) At the annual meeting:(a) The president, and any other officer the board of directors or

the president may designate, shall report on the activities and financial condition of the corporation; and

(b) The members shall consider and act upon such other mattersas may be raised consistent with the notice requirements of ORS65.214.

(5) At regular meetings the members shall consider and act uponsuch matters as may be raised consistent with the notice requirements of ORS 65.214.

(6) The failure to hold an annual or regular meeting at a timestated in or fixed in accordance with a corporation's bylaws doesnot affect the validity of any corporate action. [1989 c.l0l0 § 52]


(1) Proposed Changes to the Model Act: In subsection (4)(a),only the president is required to report at the annual meeting,whereas the Model Act requires the president and the chief financialofficer to report. The reporting requirement for the chief financialofficer has been dispensed with because many nonprofit corporations either have no such officer or may prefer that others (includingthe president) make reports. The revised text allows the board ofdirectors or the president to authorize or designate other officers to

72

ORS 65.204

report. The information to be reported is more important than theoffice held by the person giving the report.

(2) Effective Changes from Chapter 61 Provisions: The proposaladds the Model Act concept of regular meetings and spells out infurther detail the matters that should be attended to at annual andregular meetings.

ORS 61.101 provided that the failure to hold the annual meetingat the designated time does not work a forfeiture or dissolution ofthe corporation. The approach in the proposal is to indicate thatfailure to hold annual or regular meetings timely does not affect thevalidity of any corporate action.

The proposal supplants the final sentences of ORS 61.101(2)which authorize the president, the board of directors, or five percentof the members to call for an annual meeting that has not been heldat the designated time. The proposal retains such authority underORS 65.204, Model Act § 7.02 (special meetings), and judicial reliefis available under ORS 65.038 and 65.207, Model Act §§ 1.60 and7.03.

(3) Relationship to the Oregon Business Corporation Act: Generally parallels ORS 60.201. The proposal omits provision for telephonic meetings (the Business Corporation Act Amendmentsproposal for inclusion in ORS 60.201 to 60.221). Few nonprofitcorporations have the small number of members that would makesuch a provision useful.

65.204 SPECIAL MEETING

(1) A corporation with members shall hold a special meeting ofmembers:

(a) On call of its board of directors or the person or persons authorized to do so by the articles of incorporation or bylaws; or

(b) Except as provided in the articles or bylaws, if the holders ofat least five percent of the voting power of any corporation sign,date and deliver to the corporation's secretary one or more writtendemands for the meeting describing the purpose or purposes forwhich it is to be held.

(2) If not otherwise fixed under ORS 65.207 or 65.221, the record date for members entitled to demand a special meeting is thedate the first member signs the demand.

(3) If a notice for a special meeting demanded under paragraph

73

.--

ORS 65.204

(b) of subsection (1) of this section is not given pursuant to ORS65.214 within 30 days after the date the written demand or demandsare delivered to the corporation's secretary then, regardless of therequirements of subsection (4) of this section, a person signing thedemand or demands may set the time and place of the meeting andgive notice pursuant to ORS 65.214.

(4) Special meetings of members may be held in or out of thisstate at the place stated in or fixed in accordance with the bylaws.If no. place is stated or fixed in accordance with the bylaws, specialmeetmgs shall be held at the corporation's principal office.

(5) Only matters within the purpose or purposes described in themeeting notice required by ORS 65.214 may be conducted at a special meeting of members. [1989 c.l0l0 § 53]


(1) .~roposed Changes to the Model Act: In subsection (l)(b),the ablhty of all nonprofit corporations (i.e., both religious and~ther) to specify in their articles or bylaws the number or proportion of members entitled to call a meeting is expanded as comparedto the Model Act. Where no such provision is made, the holders ofat least five percent of the votes entitled to be cast on any issuesproposed to be considered must make the written demand. Thisapproach derives from the proposed change in the definition of theterm "member" as compared with the Model Act and adopts moreclosely the approach taken in Chapter 60 when defining who mustmake the demand. A slight variation from the Model Act is thespecification of the corporation's secretary (rather than any corporate officer) as the person to whom the written demand must bedelivered.

(2) Effective Changes from Chapter 61 Provisions: The proposalliberalizes the ability of the corporation to make special provisionfor the persons entitled to call a special meeting. The proposal requires what probably is implied in ORS 61.105(1), namely, thatonly matters specified in the notice be acted upon at a specialmeeting.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.204(1). The proposal also tracks moreclosely than the Model Act the provisions of ORS 60.204(2) withrespect to the determination of the record date. On the other hand,

74

ORS 65.207

the proposal follows the Model Act approach of allowing the persons signing the demand to set the time and place of the meetingwhere a notice for a special meeting is not given within 30 days afterthe date of the demand.

65.207 COURT-ORDERED MEETING

(1) The circuit court of the county where a corporation's principal office is located, or, if the principal office is not in this state,where the registered office of the corporation is or was last located,may summarily order a meeting to be held:

(a) On application of any member or other person entitled toparticipate in an annual or regular meeting or, in the case of a public benefit corporation, the Attorney General, if an annual meetingwas not held within the earlier of six months after the end of thecorporation's fiscal year or 15 months after its last annual meeting;

(b) On application of any member or other person entitled toparticipate in a regular meeting or, in the case of a public benefitcorporation, the Attorney General, if a regular meeting is not heldwithin 40 days after the date it was required to be held; or

(c) On application of a member who signed a demand for a special meeting valid under ORS 65.204, a person or persons entitledto call a special meeting or, in the case of a public benefit corporation, the Attorney General, if notice of the special meeting was notgiven within 30 days after the date the demand was delivered to thecorporation's secretary or the special meeting was not held in accordance with the notice.

(2) The court may fix the time and place of the meeting, determine the members entitled to participate in the meeting, specify arecord date for determining members entitled to notice of and tovote at the meeting, prescribe the form and content of the meetingnotice, fix the quorum required for specific matters to be consideredat the meeting or direct that the votes represented at the meetingconstitute a quorum for action on those matters, and enter otherorders necessary to accomplish the purpose or purposes of themeeting.

(3) If the court orders a meeting, it may also order the corporation to pay the member's costs, including reasonable attorney fees,incurred to obtain the order.

(4) The request shall be set for hearing at the earliest possible

75

ORS 65.211

time and shall take precedence over all matters, except matters ofthe same character and hearings on preliminary injunctions underORCP 79 B.(3). No order shall be issued by the court under thissection without notice to the corporation at least five days in advance of the time specified for the hearing unless a different periodis fixed by order of the court. [1989 c.1010 § 54]

OFFICIAL COMMENT TO ORS 65.~07 (MODEL ACT § 7.03)

(1) Proposed Changes to the Model Act: In subsections (1)(a),(b), and (c), "and" has been changed to "or" to express the intended~ea~ing correctly. In subsection (2), in addition to the power specIfied 10 the Model Act, the court is further authorized to "determinethe members entitled to participate in the meeting." In subsection(4), the provision for costs and attorneys' fees is deleted and theprovision set forth in ORS 60.207(3) (referring to ORCP 79 B.(3))is substituted in its place.

(2) Effective Changes from Chapter 61 Provisions: This is a newprovision without a counterpart in Chapter 61.

(3) Relationship to the Oregon Business Corporation Act: Thisprovision parallels ORS 60.207.

65.211 ACTION WITHOUT MEETING

(1) Unless the articles of incorporation or bylaws provide otherwise, action required or permitted by this chapter to be taken at amembers' meeting may be taken without a meeting if the action istaken by all the members entitled to vote on the action. The actionmust be evidenced by one or more written consents describing theaction taken, signed by all the members entitled to vote on the action, and delivered to the corporation for inclusion in the minutes orfiling with the corporate records. Action taken under this section iseffective when the last member signs the consent, unless the consentspecifies an earlier or later effective date.

(2) If not otherwise determined under ORS 65.207 or 65.221, therecord date for determining members entitled to take action without a meeting is the date the first member signs the consent undersubsection (1) of this section.

(3) A consent signed under this section has the effect of a meeting vote and may be described as such in any document. [1989c.1010 § 55]

76

ORS 65.214


(1) Proposed Changes to the Model Act: The initial phrase hasbeen conformed to ORS 65.341(1), Model Act § 8.21(a). The language of the Model Act that refers to action "to be approved" bythe members has been changed to conform to the approach used inORS 61.935 and ORS 60.211, namely, action "to be taken at amembers' meeting." The proposal also follows the approach of thelast sentence of ORS 60.211(1) in providing that action is effectivewhen the last member signs the consent, unless the consent specifiesan earlier or later effective date.

The proposal carries forward prior Oregon law that requiresunanimous action rather than action by at least 80% of the votingpower as provided in the Model Act. Nonprofit corporations oftenhave many members, and unanimous consent might be difficult toobtain simply because of the numbers involved. If unanimous consent is unattainable, an option is a ballot mailed to members as asubstitute for a meeting.

The proposal also eliminates from subsection (3) the provision inModel Act subsection (c) that refers to documents "filed with theSecretary of State." A similar approach is taken in ORS 60.211(3).

The proposal omits the provision of the Model Act in subsection(d) requiring notice to members who have not signed the consent.This is appropriate because the proposal opts for unanimous consent rather than 80% or greater approval.

(2) Effective Changes from Chapter 61 Provisions: The proposalfollows generally the provisions of ORS 61.935, but with the furtherelaboration set forth in ORS 60.211. As under current law, noticeis not required to be given to members who lack voting power.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.211 but omits ORS 60.211(4), which requires notice to shareholders without voting power. The articles orbylaws may limit or prohibit members' authority to act without ameeting.

65.214 NOTICE OF MEETING

(1) A corporation shall give notice consistent with its bylaws ofmeetings of members in a fair and reasonable manner. The corporation is required to give notice to members entitled to vote at the

77

ORS 65.214

meeting and to any other person specified in this chapter, the articles of incorporation or the bylaws.

(2) Any notice which conforms to the requirements of subsection(3) of this section is fair and reasonable, but other means of givingnotice may also be fair and reasonable when all the circumstancesare considered, provided, however, that notice of matters referredto in paragraph (b) of subsection (3) of this section must be given asprovided in subsection (3) of this section.

(3) Notice is fair and reasonable if:(a) The corporation notifies its members of the place, date and

time of each annual, regular and special meeting of members nofewer than seven days, or if notice is mailed by other than first classor registered mail, no fewer than 30 nor more than 60 days beforethe meeting;

(b) Notice of an annual or regular meeting includes a descriptionof any matter or matters which must be approved by the membersunder ORS 65.361, 65.404, 65.414 (1)(a), 65.437, 65.464, 65.487,65.534 or 65.624; and

(c) Notice of a special meeting includes a description of the purpose or purposes for which the meeting is called.

(4) Unless the bylaws require otherwise, if an annual, regular orspecial meeting of members is adjourned to a different date, time orplace, notice need not be given of the new date, time or place, if thenew date, time or place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is or must befixed under ORS 65.221, however, notice of the adjourned meetingmust be given under this section to the persons who are members asof the new record date. [1989 c.1010 § 56; 1991 c.231 § 2]


(1) Proposed Changes to the Model Act: Subsection (1) is modified to follow existing law in requiring notice only to members entitled to vote. The articles of incorporation or bylaws may requirenotice to non-voting members. Because "matters" are individualitems on which a vote may be taken (see ORS 65.227(1), Model Act§ 7.21(a», subsection (3)(c) refers to notice of "purposes." Thewording in subsection (4) follows 60.214(5). Model Act § 7.05(e),allowing members to place items on the agenda for a meeting, hasbeen omitted.

78

ORS 65.217

(2) Effective Changes/rom Chapter 61 Provisions: The safe harbor notice requirements generally follow ORS 61.105(1) except thatfurther specificity is required in the notice of regular meetings ofmembers. Also, rules are provided that do not appear in Chapter61 for the notice of adjourned meetings.

Under current law, seven days notice is required, and a mailboxrule applies, whatever the class of mail used. Under the prop~sal,

the "mailbox rule" continues in ORS 65.034(3), but the deadhnesare extended and classes of mail are distinguished. Under ORS65.034(5) and 65.214(3)(a), Model Act §§ 1.41(a) and 7.05(c)(I),mailed notice is to be placed in the mail no fewer than seven daysbefore the meeting date if mailed by first-class or registered ~~il,

and 30 days if mailed otherwise. Many nonprofits use bulk madmgwhich could take longer than seven days to be delivered.

Under the proposal, notice must be fair and reasonable. T?e notice provisions of ORS 61.105(2) and (3) are examples of fair andreasonable notice by publication.

Subsection (4) adopts the approach of ORS 60.214(4). This provision specifies a record date unless one is otherwise fixed underORS 65.207 or 65.221, Model Act §§ 7.03 or 7.07.

(3) Relationship to the Oregon Business Corporation Act: Theproposal generally follows ORS 60.214, except that it adopts a moreliberal standard for "fair and reasonable" notice as proposed by theModel Act for nonprofit corporations. A ten-day notice rule is provided for in Chapter 60.


The changes correct errors in cross-references.

65.217 WAIVER OF NOTICE

(1) A member may at any time waive any notice required by thischapter, the articles or bylaws. The waiver must be i~ writing, besigned by the member entitled to the notice and be delivered to thecorporation for inclusion in the minutes or filing with the corporaterecords.

(2) A member's attendance at a meeting waives objection to:(a) Lack of notice or defective notice of the meeting, unless the

member at the beginning of the meeting objects to holding the meeting or transacting business at the meeting; and

79

-

ORS 65.221

(b) Consideration of a particular matter at the meeting that isnot within the purpose or purposes described in the meeting notice,unless the member objects to considering the matter when it ispresented. [1989 c.l0l0 § 57]


(1) Proposed Changes to the Model Act: The proposal generallyfollows the provisions of the Model Act, except for minor wordingchanges.

(2) Effective Changes from Chapter 61 Provisions: The proposalis similar to ORS 61.930, but adds provisions regarding the effect ofa member's attendance at a meeting with respect to the right toobject to business transacted at the meeting.

(3) Relationship to the Oregon Business Corporation Act: Theprovision generally follows ORS 60.217.

(4) Other Comments: A member who objects to the meetingunder subsection (2)(a) should not be counted towards the quorumor in voting, and a member who objects to consideration of a matterunder (2)(b) should not be counted in the voting.

65.221 RECORD DATE

(1) The bylaws may fix or provide the manner of fixing the record date in order to determine the members entitled to notice of amembers' meeting, to demand a special meeting, to vote or to takeany other lawful action. If the bylaws do not fix or provide for fixing such a record date, the board of directors may fix a future dateas the record date. If no such record date is fixed, then:

(a) To determine the members entitled to notice of a members'meeting, the record date shall be the day before the day on whichfirst notice is mailed or otherwise transmitted to members in accordance with ORS 65.034, or if natice is waived, the day precedingthe day on which the meeting is held.

(b) To determine the members entitled to demand a special meeting, the record date shall be as set forth in ORS 65.204 (2).

(c) To determine the members entitled to take action without ameeting, the record date shall be as set forth in ORS 65.211 (2).

(d) To determine the members entitled to vote at a members'meeting, the record date shall be the date of the meeting.

(e) To determine the members entitled to exercise any rights in

80

ORS 65.221

respect to any other lawful action, the record date shall be the dayon which the board adopts the resolution relating thereto, or the60th day prior to the date of such other action, whichever is later.

(2) A record date fixed under this section may not be more than70 days before the meeting or action requiring the determination ofmembers.

(3) A determination of members entitled to notice of or to vote ata membership meeting is effective for any adjournment of the meeting unless the board fixes a new record date, which it must do if themeeting is adjourned to a date more than 120 days after the datefixed for the original meeting.

(4) If a court orders a meeting adjourned to a date more than 120days after the date fixed for the original meeting, it may providethat the original record date continues in effect or it may fix a newrecord date. [1989 c.l0l0 § 58]


(1) Proposed Changes to the Model Act: The proposal followsthe structural approach used in ORS 60.221 for determining therecord date. Accordingly, the provisions of Model Act §§ 7.07(b)and (c) (regarding the record date for determining members entitledto vote and members entitled to exercise other rights) have beenmoved into the operative provisions elsewhere in the proposal asappropriate. Subsection (1) includes cross-references, so that it furnishes a comprehensive list of record date provisions.

The provision in subsection (3) provides for a 120-day periodbefore which an adjourned meeting requires a new record date.This approach is consistent with ORS 60.221(3). Subsection (1)(a)has been amended to conform to amendments to ORS 60.214(4)proposed for the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: ORS Chapter 61 contains no record date provisions. The addition of recorddate provisions should increase certainty in taking corporate actionsand, therefore, is desirable. The concept of record date tells whento take a snapshot of the members entitled to take any particularactions. Even if nonprofit corporations do not routinely use theconcept of record date, that concept will allow them to decide definitely when to count the members.

(3) Relationship to the Oregon Business Corporation Act: The

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provision generally follows ORS 60.221, except that the proposalsets forth a default record date where one is not otherwise determined. If the board of directors or the bylaws do not set the recorddate, the record date will be fixed in accordance with the applicablesubparagraph of subsection (I). ORS Chapter 60 does not containprovisions that describe how a record date will be fixed if the boardor the bylaws fail to fix the date. Such a provision is needed fornonprofit corporations, many of which are unfamiliar with the concept of record date.

65.222 ACTION BY WRITTEN BALLOT

(1) Unless prohibited or limited by the articles or bylaws, anyaction which may be taken at any annual, regular or special meetingof members may be taken without a meeting if the corporation delivers a written ballot to every member entitled to vote on thematter.

(2) A written ballot shall:(a) Set forth each proposed action; and(b) Provide an opportunity to vote for or against each proposed

action.(3) Approval by written ballot pursuant to this section shall be

valid only when the number of votes cast by ballot equals or exceeds any quorum required to be present at a meeting authorizingthe action, and the number of approvals equals or exceeds thenumber of votes that would be required to approve the matter at ameeting at which the total number of votes cast was the same as thenumber of votes cast by ballot.

(4) All solicitations for votes by written ballot shall:(a) Indicate the number of responses needed to meet the quorum

requirements;(b) State the percentage of approvals necessary to approve each

matter other than election of directors; and(c) Specify a reasonable time by which a ballot must be received

by the corporation in order to be counted.(5) Except as otherwise provided in the articles or bylaws, a

written ballot may not be revoked. [1989 c.1010 § 59]


(1) Proposed Changes to the Model Act: Subsection (c) is

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ORS 65.224

changed because the proposed act has no minimum quorum. SeeORS 65.241(1), departing from Model Act § 7.22(a). Subsection(4)(c) requires a reasonable amount of time for return of ballots.Consistent with the norm in ORS 65.214(3)(a) of seven days noticeof members' meeting, a reasonable time for return of ballots mightbe at least seven days after delivery or seventeen days after mailing.

(2) Effective Changes from Chapter 61 Provisions: No detailedprocedures exist in ORS Chapter 61, although ORS 61.111(2) contains a provision for voting upon the election of directors or officersby mail if the bylaws so provide.

(3) Relationship to the Oregon Business Corporation Act: Noparallel provision.

(4) Other Comments: This section is intended to simplify andto codify existing practice.

(VOTING)

65.224 MEMBERS' LIST FOR MEETING

(1) A corporation shall prepare an alphabetical list of the names,addresses and membership dates of all its members. If there areclasses of members, the list must show the address and number ofvotes each member is entitled to vote at the meeting. The corporation shall prepare on a current basis through the time of the membership meeting a list of members, if any, who are entitled to vote atthe meeting, but are not part of the main list of members.

(2) The list of members must be available for inspection by anymember for the purpose of communication with other members concerning the meeting, beginning two business days after notice of themeeting is given for which the list was prepared and continuingthrough the meeting, at the corporation's principal office or at areasonable place identified in the meeting notice in the city or otherlocation where the meeting will be held. A member, the member'sagent or attorney is entitled, on written demand setting forth aproper purpose, to inspect and, subject to the requirements of ORS65.774 and 65.782, to copy the list at a reasonable time and at themember's expense, during the period it is available for inspection.

(3) The corporation shall make the list of members available atthe meeting, and any member, the member's agent or attorney isentitled to inspect the list for any proper purpose at any time duringthe meeting or any adjournment.

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(4) If the corporation refuses to allow a member, the member'sagent or attorney to inspect the list of members before or at themeeting or copy the list as permitted by subsection (2) of this section, on application of the member, the circuit court of the countywhere the corporation's principal office, or if the principal office isnot in this state, where its registered office is or was last located,may enter a temporary restraining order or preliminary injunctionpursuant to ORCP 79 ordering the inspection or copying at the corporation's expense and may postpone the meeting for which the listwas prepared until the inspection or copying is complete and mayorder the corporation to pay the member's costs, including reasonable attorney fees, incurred to obtain the order. The party initiatingsuch a proceeding shall not be required to post an undertaking pursuant to ORCP 82 A.

(5) Refusal or failure to prepare or make available the membership list does not affect the validity of action taken at the meeting.

(6) The articles or bylaws of a religious corporation may limit orabolish the rights of a member under this section to inspect andcopy any corporate record.

(7) The articles of a public benefit corporation organized primarily for political or social action, including but not limited to political or social advocacy, education, litigation or a combinationthereof, may limit or abolish the right of a member or the members'agent or attorney to inspect or copy the membership list if the corporation provides a reasonable means to mail communications tothe other members through the corporation at the expense of themember making the request. [1989 c.l0l0 § 60]


(1) Proposed Changes to the Model Act: The proposal generallyfollows the Model Act. There are minor wording changes to parallel ORS 60.224.

The list-keeping requirements of subsection (1) have been simplified, since many nonprofit organizations do not keep currentrecords of their members. The membership date will allow determining who was a member as of a record date, but the corporationneed not keep a list of which members were entitled to notice of ameeting.

Nonprofit corporations should be able to keep their membership

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ORS 65.227

list confidential to prevent harassment of members or commercialuse of the list. As under current law, this section limits access tothe members list to those who can demonstrate a proper purpose forinspecting the list. A special provision that goes beyond the ModelAct has been added that allows political advocacy and social actionpublic benefit corporations, by amending their articles, to limit orabolish member access to the list where a reasonable means of mailing communications to other members exists.

In subsection (5) validity of an action at a meeting is preservedwithout regard to a written demand and improper refusal. This section was revised to provide that the refusal or failure to prepare ormake available the membership list does not invalidate corporateaction. The Model Act makes such a refusal or failure potentialgrounds for invalidation.

(2) Effective Changes/rom Chapter 61 Provisions: The proposalwould expand upon and provide greater certainty than the corresponding provisions in ORS 61.161. The requirement in subsection(1) that the membership list contain dates of membership will permit determining who the members were as of any record date.

(3) Relationship to the Oregon Business Corporation Act: Theprovision substantially follows the shareholder list provisions inORS 60.224.

65.227 VOTING ENTITLEMENT OF MEMBERS

(1) Unless the articles or bylaws provide otherwise, each memberis entitled to one vote on each matter voted on by the members,including each matter on which a member is entitled to vote underthis chapter or the articles or bylaws. Except as expressly prohibited in this chapter, the articles or bylaws may provide for differentallocations of votes among member classes or exclude the membersor some or all member classes from voting on any issue on whichthey would otherwise be entitled to vote under this chapter. Personsnot retaining a right to vote on more than one occasion for the election of a director or directors shall not be deemed members.

(2) Unless the articles or bylaws provide otherwise, if a membership stands of record in the names of two or more persons, theiracts with respect to voting shall have the following effect:

(a) If only one votes, such act binds all; and

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ORS 65.231

(b) If more than one votes, the vote shall be divided on a pro ratabasis. [1989 c.1010 § 61; 1991 c.231 § 3]


(1) Proposed Changes to the Model Act: See Official CommentTo 1991 Legislative Amendment below.

(2) Effective Changes from Chapter 61 Provisions: ORS61.111(1) contains provisions similar to subsection (1). The provision for membership standing of record in two or more names hasno counterpart in ORS Chapter 61.

(3) Relationship to the Oregon Business Corporation Act: ORS60.227 contains a provision similar to subsection (1), and the provisions of ORS 60.234 are essentially analogous to subsection (2).


The third sentence of subsection (1) is a reminder that membership derives from the right to vote on the election of directors. ORS65.001(22)(a), as amended herein. The additional language in thefirst sentence clarifies that any person who is a member, by virtue ofthose voting rights, is entitled to vote on all matters which must beapproved by members, unless the articles or bylaws vary members'voting rights. The second sentence recognizes that voting rightsmay be varied as between classes or partially eliminated. See ORS65.144, which accords all members the same voting rights, unlessthe articles or bylaws have created classes of members.

65.231 PROXIES

(1) Unless the articles or bylaws prohibit or limit proxy voting, amember may appoint a proxy to vote or otherwise act for the member by signing an appointment form either personally or by themember's attorney-in-fact.

(2) An appointment of a proxy is effective when received by thesecretary or other officer or agent authorized to tabulate votes. Anappointment is valid for 11 months unless a different period is expressly provided in the appointment form.

(3) An appointment of a proxy is revocable by the member.(4) The death or incapacity of the member appointing a proxy

does not affect the right of the corporation to accept the proxy'sauthority unless notice of the death or incapacity is received by the

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ORS 65.234

secretary or other officer or agent authorized to tabulate votesbefore the proxy exercises authority under the appointment.

(5) Appointment of a proxy is revoked by the person appointingthe proxy:

(a) Attending any meeting and voting in person; or(b) Signing and delivering to the secretary or other officer or

agent authorized to tabulate proxy votes either a writing statingthat the appointment of the proxy is revoked or a subsequent appointment form.

(6) Subject to DRS 65.237 and any express limitation on theproxy's authority appearing on the face of the appointment form, acorporation is entitled to accept the proxy's vote or other action asthat of the member making the appointment. [1989 c.1010 § 64]


(1) Proposed Changes to the Model Act: The only substantivechange is the deletion from subsection (2) of the limitation on theduration of a proxy. The Model Act limits a proxy to three yearsfrom the date of execution, while ORS Chapter 60 has no suchlimitation.

(2) Effective Changes from Chapter 61 Provisions: The proposalprovides further detail as to the effect of a proxy and the mannerand consequences of revocation. See ORS 61.111 (2). Under current nonprofit law, a proxy is limited to 11 months.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.231, except that the provision for revocation, based on the Model Act, has no counterpart in Chapter 60.Subsection (2) has the term "different" where ORS 60.231(3) hasthe term "longer"; the language of ORS 60.231(3) would appear topreclude appointing a proxy for less than 11 months.

65.234 ADJOURNMENT

Unless otherwise provided in the articles of incorporation or bylaws, a majority of votes represented at a meeting of members,whether or not a quorum, may adjourn the meeting from time totime to a different time and place without further notice to anymember of any adjournment, except as such notice may be requiredby DRS 65.214(4). At the adjourned meeting at which a quorum is

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ORS 65.237

present, any business may be transacted that might have been transacted at the meeting originally held. [1989 c.1010 § 68]

OFFICIAL COMMENT TO ORS 65.234 (MODEL ACT § (NONE))

(1) Proposed Changes to the Model Act: This provision has nocounterparts in the Model Act.

(2) Effective Changes from Chapter 61 Provisions: This provision has no counterpart in ORS Chapter 61.

(3) Relationship to the Oregon Business Corporation Act. Thisprovision parallels the Business Corporation Act Amendment, substituting "member" for "shareholder."

65.237 CORPORATION'S ACCEPTANCE OF VOTES

(1) If the name signed on a vote, consent, waiver or proxy appointment corresponds to the name of a member, the corporation, ifacting in good faith, is entitled to accept the vote, consent, waiveror proxy appointment and give it effect as the act of the member.

(2) If the name signed on a vote, consent, waiver or proxy appointment does not correspond to the record name of a member, thecorporation if acting in good faith is nevertheless entitled to acceptthe vote, consent, waiver or proxy appointment and give it effect asthe act of the member if:

(a) The member is an entity and the name signed purports to bethat of an officer or agent of the entity;

(b) The name signed purports to be that of an attorney-in-fact ofthe member and if the corporation requests, evidence acceptable tothe corporation of the signatory's authority to sign for the memberhas been presented with respect to the vote, consent, waiver orproxy appointment;

(c) Two or more persons hold the membership as cotenants orfiduciaries and the name signed purports to be the name of at leastone of the coholders and the person signing appears to be acting onbehalf of all the coholders; or

(d) In the case of a mutual benefit corporation:(A) The name signed purports to be that of an administrator, ex

ecutor, guardian or conservator representing the member and, if thecorporation requests, evidence of fiduciary status acceptable to thecorporation has been presented with respect to the vote, consent,waiver or proxy appointment; or

88

ORS 65.241

(B) The name signed purports to be that of a receiver or trusteein bankruptcy of the member, and, if the corporation requests, evidence of this status acceptable to the corporation has beenpresented with respect to the vote, consent, waiver or proxyappointment.

(3) The corporation is entitled to reject a vote, consent, waiver orproxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis fordoubt about the validity of the signature on it or about the signatory's authority to sign for the member.

(4) The corporation and its officer or agent who accepts or rejects a vote, consent, waiver or proxy appointment in good faith andin accordance with the standards of this section are not liable indamages to the member for the consequences of the acceptance orrejection.

(5) Corporate action based on the acceptance or rejection of avote, consent, waiver or proxy appointment under this section isvalid unless a court of competent jurisdiction determines otherwise.[1989 c.1010 § 67]


(1) Proposed Changes to the Model Act: None except stylistic.(2) Effective Changes from Chapter 61 Provisions: No counter

part provisions appear in ORS Chapter 61. This section is intendedto permit the corporation to use any good faith means in determining whether or not to accept votes.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.237, with special provisions peculiar tononprofit corporations.

65.241 QUORUM REQUIREMENTS

(1) Unless the articles or bylaws provide for a higher quorum,those votes represented at a meeting of members shall constitute aquorum.

(2) An amendment to the articles or bylaws to decrease the quorum for any member action may be approved by the members, or,unless prohibited by the articles or bylaws, by the board.

(3) An amendment to the articles or bylaws to increase the quo-

89

«

ORS 65.244

rum required for any member action must be approved by the members. [1989 c.1010 § 62]


(1) Proposed Changes to the Model Act: The proposal rejectsthe Model Act's 10% minimum where no lower number is specifiedin the articles or bylaws. It also rejects the 1/3 minimum for deviating from the meeting notice at an annual or regular meeting.Since the quorum can be specified in the articles, subsections (2)and (3) refer to amendments to the articles.

(2) Effective Changes from Chapter 61 Provisions: ORS61.115(2) provides that members present at any annual or specialmeeting constitute a quorum unless the bylaws provide that agreater number constitutes a quorum. The proposal generally follows current law, except that the phrase "votes represented" includes proxies. The proposal also allows a greater number to bespecified in the articles. The procedure for amending quorum requirements has no counterpart in ORS Chapter 61.

(3) Relationship to the Oregon Business Corporation Act: Theproposal generally parallels ORS 60.241 and 60.247(2).

(4) Other Comments: An amendment to quorum requirementsmust be adopted by a vote meeting the quorum required immediately before the amendment. See ORS 60.247(2).

65.244 VOTING REQUIREMENTS

(1) Unless this chapter, the articles or the bylaws require agreater vote or voting by class, if a quorum is present, the affirmative vote of a majority of the votes represented and voting is the actof the members.

(2) An amendment to the articles or bylaws to add to, change ordelete the vote required for any member action must be approved bythe members. [1989 c.1010 § 63]


(1) Proposed Changes to the Model Act: To parallel the changesin the definition of "approved by the members" in ORS 65.001(2)by comparison with Model Act § 1.40, subsection (1) is modified bydeleting the additional requirement that a vote be the majority ofthe quorum. Since voting requirements can be in the articles, sub-

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ORS 65.247

section (2) mentions amendments to the articles. To parallel ORS60.247(2), subsection (2) mentions addition, change, or deletion ofvoting requirements.

(2) Effective Changes from Chapter 61 Provisions: Existing lawtreats abstentions as negative votes, whereas subsection (1) does notcount abstentions. Subsection (2) has no analogue in Chapter 61.

(3) Relationship to the Oregon Business Corporation Act: Subsection (1) is analogous to ORS 60.241(3) and subsection (2) isanalogous to ORS 60.241(4) and 60.247, except that voting requirements may be in the bylaws as well as in the articles. Chapter 60introduced into Oregon the change in the treatment of abstentionsproposed here for nonprofit corporations.

(4) Other Comments: An amendment to voting requirementsmust be adopted by the vote and classes required to take actionimmediately prior to the amendment. See ORS 60.247(2).

65.247 CUMULATIVE VOTING FOR DIRECTORS

(1) If the articles or bylaws provide for cumulative voting bymembers, members may so vote, by multiplying the number of votesthe members are entitled to cast by the number of directors forwhom they are entitled to vote, and cast the product for a singlecandidate or distribute the product among two or more candidates.

(2) Cumulative voting is not authorized at a particular meetingunless:

(a) The meeting notice or statement accompanying the noticestates that cumulative voting will take place; or

(b) A member gives notice during the meeting and before thevote is taken of the member's intent to cumulate votes, and if onemember gives this notice all other members participating in theelection are entitled to cumulate their votes without giving furthernotice.

(3) A director elected by cumulative voting may be removed bythe members without cause if the requirements of ORS 65.324 aremet unless the votes cast against removal, or not consenting in writing to such removal, would be sufficient to elect such director ifvoted cumulatively at an election at which the same total number ofvotes were cast or, if such action is taken by written ballot, allmemberships entitled to vote were voted and the entire number of

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ORS 65.251

directors authorized at the time of the director's most recent election were then being elected.

(4) Members may not cumulatively vote if the directors andmembers are identical. [1989 c.l0l0 § 65]


(1) Proposed Changes to the Model Act: The proposal followsthe Model Act.

(2) Effective Changes from Chapter 61 Provisions: ORS61.111(3) allows for cumulative voting if it is authorized in the articles, but does not provide nearly the detail specified in the ModelAct.

(3) Relationship to the Oregon Business Corporation Act: TheModel Act is more detailed than ORS 60.251, which does providefor cumulative voting.

65.251 OTHER METHODS OF ELECTING DIRECTORS

A corporation may provide in its articles or bylaws for election ofdirectors by members or delegates:

(1) On the basis of chapter or other organizational unit;(2) By region or other geographic unit;(3) By preferential voting; or(4) By any other reasonable method. [1989 c.l0l0 § 66]


(1) Proposed Changes to the Model Act: None.(2) Effective Changes from Chapter 61 Provisions: No counter

part provisions appear in ORS Chapter 61.(3) Relationship to the Oregon Business Corporation Act: No

parallel provision appears in ORS Chapter 60.(4) Other Comments: The flexibility allowed by the proposal is

desirable in view of the variety of organizations that may be governed by the Act.

(VOTING AGREEMENTS)

65.254 VOTING AGREEMENTS

(1) Two or more members may provide for the manner in whichthey will vote by signing an agreement for that purpose. Such agree-

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ORS 65.301

ments may be valid for a period of up to 10 years. For public benefitcorporations such agreements must have a reasonable purpose notinconsistent with the corporation's public or charitable purposes.

(2) A voting agreement created under this section is specificallyenforceable. [1989 c.l0l0 § 69]


(1) Proposed Changes to the Model Act: None(2) Effective Changes from Chapter 61 Provisions: No counter

part provisions appear in ORS Chapter 61.(3) Relationship to the Oregon Business Corporation Act: The

provisions are similar to the voting agreement provisions in ORS60.257(1) and (2). ORS 65.254, Model Act § 7.30, makes suchagreements valid for up to 10 years, as is presently the case in ORSChapter 60.

(4) Other Comments: The recognition of voting agreementsmay provide further assurance to members where otherwise enforceability of such agreements may have been doubtful.


(BOARD OF DIRECTORS)

65.301 REQUIREMENT FOR AND DUTIES OF BOARD

(1) Each corporation shall have a board of directors.(2) All corporate powers shall be exercised by or under the au

thority of, and the affairs of the corporation managed under thedirection of, the board of directors, subject to any limitation setforth in the articles of incorporation and except as provided in subsection (3) of this section.

(3) The articles of incorporation may authorize a person or persons, or the manner of designating a person or persons, authorizedto exercise some or all of the powers which would otherwise be exercised by a board. To the extent so authorized any such person orpersons shall have the duties and responsibilities of the directors,and the directors shall be relieved to that extent from such dutiesand responsibilities. [1989 c.l0l0 § 70]


(1) Proposed Changes to the Model Act: The Model Act has

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ORS 65.304

been modified to reflect the language of the Business CorporationAct.

(2) Effective Changes from Chapter 61 Provisions: The proposalbroadens the corporation's power to delegate, in the articles, powerswhich would otherwise be exercised by the board. This power todelegate includes the power to retrieve delegated powers. For example, if the articles of incorporation authorize the board to delegate certain powers, the board of directors would also have theauthority to retrieve such powers. The new provision specifies thatdirectors are relieved from duties and responsibilities delegated bythe articles.

(3) Relationship to the Oregon Business Corporation Act: Subsections (1) and (2) parallel ORS 60.301; subsection (3) has no corresponding provision in the Business Corporation Act.

65.304 QUALIFICATIONS OF DIRECTORS

All directors must be individuals. The articles of incorporation orbylaws may prescribe other qualifications for directors. [1989c.1010 § 71]



specifies that directors must be individuals.(3) Relationship to the Oregon Business Corporation Act: The

proposal generally parallels ORS 60.304, although ORS 60.304spells out that directors need not be residents unless required by thearticles or bylaws.

65.307 NUMBER OF DIRECTORS

(1) A board of directors must consist of one or more individualsfor a mutual benefit or religious corporation and three or more individuals for a public benefit corporation, with the number specifiedor fixed in accordance with the articles of incorporation or bylaws.

(2) The articles of incorporation or bylaws may establish a variable range for the size of the board of directors by fixing a minimumand maximum number of directors. If a variable range is established, the number of directors may be fixed or changed periodically, within the minimum and maximum, by the members or the

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ORS 65.311

board of directors. If the articles of incorporation establish a fixedor a variable range for the size of the board of directors and thecorporation has members entitled to vote for directors, then onlythe members may change the range for the size of the board orchange from a fixed or a variable-range size board. [1989 c.1010§ 72]


(1) Proposed Changes to the Model Act: The proposal permitsthe board of a mutual benefit or religious corporation to consist ofone or more persons (See ORS 61.125(1», however, it requiresthree or more persons to serve on the board of a public benefit corporation. This change for public benefit corporations was requestedby the Attorney General. Having a three-person board helps assurediversity of input into the governance of public benefit corporationsand avoids, for example, a husband and wife alone controlling apublic corporation's affairs. Wording changes have been made forconsistency, and subsection (2) has been added to conform to theBusiness Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: The proposalgenerally follows ORS 61.125, except for requiring three-personboards for public benefit corporations. Prior to 1985, Oregon'sNonprofit Corporation Law required three-person boards for allnonprofit corporations.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.307(2), except for the three-person boardrequirement.

(4) Other comments. ORS 65.957(3) is a transition provisionallowing public benefit corporations a year to comply with the requirement of a three-member board.

65.311 ELECTION, DESIGNATION AND APPOINTMENT OFDIRECTORS

(1) If the corporation has members entitled to vote for directors,all the directors, except the initial directors, shall be elected at thefirst annual meeting of members, and at each annual meeting thereafter, unless the articles or bylaws provide some other time ormethod of election, or provide that some of the directors are appointed by some other person or are designated.

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ORS 65.314

(2) If the corporation does not have members entitled to vote fordirectors, all the directors, except the initial directors, shall beelected, appointed or designated as provided in the articles or bylaws. If no method of election, appointment or designation is setforth in the articles or bylaws, the directors, other than the initialdirectors, shall be elected by the board. [1989 c.1010 § 73]



distinguishes between corporations with and corporations withoutmembers entitled to vote for directors. If a corporation has members entitled to vote for directors, the members elect directors except to the extent the articles or bylaws provide for the appointmentor designation of some directors. Otherwise, directors are elected,appointed or designated as provided in the articles or bylaws, or ifno such provision is made, directors are elected by the board. ORS65.222, Model Act § 7.08, preserves the possibility of conductingelections by mail.

(3) Relationship to the Oregon Business Corporation Act: Theproposal diverges from ORS 60.307(3) and 60.311 because of theinherent differences between corporations with shareholders andnonprofit corporations.

65.314 TERMS OF DIRECTORS GENERALLY

(1) The articles or bylaws may specify the terms of directors.Except for designated or appointed directors, the terms of directorsmay not exceed five years. In the absence of any term specified inthe articles or bylaws, the term of each director shall be one year.Directors may be elected for successive terms.

(2) A decrease in the number of directors or term of office doesnot shorten an incumbent director's term.

(3) Except as provided in the articles or bylaws:(a) The term of a director filling a vacancy in the office of an

elected director expires at the next election of directors; and(b) The term of a director filling any other vacancy expires at the

end of the unexpired term which such director is filling.(4) Despite the expiration of a director's term, the director con

tinues to serve until the director's successor is elected, designated

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ORS 65.321

or appointed and qualifies, or until there is a decrease in the numberof directors. [1989 c.1010 § 74]



sets a five year upper limit on the terms of directors, except forappointed or designated directors. The proposal also provides thatthe term of a director filling a vacancy in the office of a directorelected by the members expires at the next election of directorsrather than at the end of the unexpired term.

(3) Relationship to the Oregon Business Corporation Act: Theproposal generally parallels ORS 60.314, although ORS 60.314 contemplates that terms will be for one year unless the articles or bylaws provide for staggered terms.

65.317 STAGGERED TERMS FOR DIRECTORS

The articles or bylaws may provide for staggering the terms ofdirectors by dividing the total number of directors into groups. Theterms of office of the several groups need not be uniform. [1989c.1010 § 75]



is substantively similar to ORS 61.125(3).(3) Relationship to the Oregon Business Corporation Act: ORS

60.317 provides for staggered terms in much more detail than theproposal.

65.321 RESIGNATION OF DIRECTORS

(1) A director may resign at any time by delivering written notice to the board of directors, its presiding officer or to the president or secretary.

(2) A resignation is effective when the notice is effective underORS 65.034 unless the notice specifies a later effective date.

(3) Once delivered, a notice of resignation is irrevocable unlessrevocation is permitted by the board of directors. [1989 c.1010§ 76]

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ORS 65.324


(1) Proposed Changes to the Model Act: The Model Act hasbeen changed to be consistent with the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: ORS Chapter 61 contains no resignation provisions. The addition of resignation provisions should add greater certainty to corporate actions.

(3) Relationship to the Oregon Business Corporation Act: Theproposal tracks ORS 60.321.

65.324 REMOVAL OF DIRECTORS ELECTED BY MEMBERS ORDIRECTORS

(1) The members may remove one or more directors elected bythem with or without cause unless the articles of incorporation provide that directors may be removed only for cause.

(2) If a director is elected by a class, chapter or other organizational unit or by region or other geographic grouping, only themembers of that class, chapter, unit or grouping entitled to votemay participate in the vote to remove the director.

(3) Except as provided in subsection (9) of this section, a directormay be removed under subsection (1) or (2) of this section only ifthe number of votes cast to remove the director would be sufficientto elect the director at a meeting to elect directors.

(4) If cumulative voting is authorized, a director may not be removed if the number of votes, or if the director was elected by aclass, chapter, unit or grouping of members, the number of votes ofthat class, chapter, unit or grouping, sufficient to elect the directorunder cumulative voting is voted against the director's removal.

(5) An elected director may be removed by the members only ata meeting called for the purpose of removing the director and themeeting notice must state that the purpose, or one of the purposes,of the meeting is removal of the director.

(6) In computing whether a director is protected from removalunder subsections (2) to (4) of this section, it should be assumedthat the votes against removal are cast in an election for the numberof directors of the class to which the director to be removed belonged on the date of that director's election.

(7) An entire board of directors may be removed under subsections (1) to (5) of this section.

(8) A director elected by the board of directors may be removed

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with or without cause, unless the articles of incorporation or bylawsprovide that directors may be removed only for cause, by the voteof two-thirds of the directors then in office or such greater numberas is set forth in the articles or bylaws. However, a director electedby the board to fill the vacancy of a director elected by the members may be removed by the members, but not the board.

(9) If at the beginning of a director's term on the board, the articles or bylaws provide that the director may be removed for reasonsset forth in the articles or bylaws, the board may remove the director for such reasons. The director may be removed only if a majority of the directors then in office vote for the removal.

(10) The articles or bylaws of a religious corporation may:(a) Limit the application of this section; and(b) Set forth the vote and procedures by which the board or any

person may remove with or without cause a director elected by themembers or the board. [1989 c.l0l0 § 77]


(1) Proposed Changes to the Model Act: Subsection (1) has beenmodified to permit the articles of incorporation to limit removal bythe members to removal for cause. Wording changes have beenmade in subsection (2) to create consistency with ORS 60.324(2).Subsection (9) has been expanded so that the board may remove adirector for any reasons set forth in the bylaws, not just for missingboard meetings. For example, other specified reasons might includemissing committee meetings or failing to complete assigned duties.

(2) Effective Changesfrom Chapter 61 Provisions: The proposalis more detailed than ORS 61.127, and adds provisions for the removal of directors elected by the board of directors. The proposalalso places lesser limitations on religious corporations by providingthat the articles or bylaws of a religious corporation may establishremoval procedures or limit the application of the section.

(3) Relationship to the Oregon Business Corporation Act: Theproposal generally tracks ORS 60.324 but is more detailed. ORS60.324 states that the articles may provide that directors may beremoved only for cause.

65.327 REMOVAL OF DIRECTORS BY JUDICIAL PROCEEDING

(1) The circuit court of the county where a corporation's princi

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pal office is located, or if the principal office is not in this statewhere its registered office was last located, may remove any director of the corporation from office in a proceeding commenced eitherby the corporation, at least 10 percent of the members of any classentitled to vote for directors, or the Attorney General in the case ofa public benefit corporation if the court finds that:

(a) The director engaged in fraudulent or dishonest conduct, orgross abuse of authority or discretion, with respect to the corporation, or the director has violated a duty set forth in ORS 65.357 to65.367; and

(b) Removal is in the best interest of the corporation.(2) The court that removes a director may bar the director from

serving on the board for a period prescribed by the court.(3) If members or the Attorney General commence a proceeding

under subsection (1) of this section, the corporation shall be made aparty defendant.

(4) A public benefit corporation or its members who commence aproceeding under subsection (1) of this section shall give the Attorney General written notice of the proceeding.

(5) The articles or bylaws of a religious corporation may limit orprohibit the application of this section. [1989 c.1010 § 79]


(1) Proposed Changes to the Model Act: Minor wordingchanges have been made for consistency with the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: ORS Chapter 61 contains no provisions relating to judicial removal of directors. The proposal gives members who would not have sufficientvotes under ORS 65.324 (Model Act § 8.08) additional rights toremove directors for specified causes. The proposal also enables theAttorney General to participate in judicial removal of public benefitcorporation directors. On the other hand, the proposal providesmore flexibility for religious corporations by permitting their articles or bylaws to limit or prohibit application of this section.

(3) Relationship to the Oregon Business Corporation Act: Theproposal generally follows ORS 60.327, but includes additional provisions applicable to particular forms of nonprofit corporations and

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ORS 65.334

the Attorney General and adds violation of the statutory duties ofdirectors as a ground for removal.

65.331 REMOVAL OF DESIGNATED OR APPOINTED DIRECTORS

(1) A designated director may be removed by an amendment tothe articles or bylaws deleting or changing the designation.

(2) If a director is appointed:(a) Except as otherwise provided in the articles or bylaws, the

director may be removed with or without cause by the person appointing the director;

(b) The person removing the director shall do so by giving written notice of the removal to the director and either the presidingofficer of the board or the corporation's president or secretary; and

(c) A removal is effective when the notice is effective under ORS65.034 unless the notice specifies a future effective date. [1989c.1010 § 78]


(1) Proposed Changes to the Model Act: The Model Act hasbeen changed for consistency with the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: ORS Chapter 61 contains no provisions relating to removal of appointed ordesignated directors. The proposal adds clarity in the treatment ofsuch directors.

(3) Relationship to the Oregon Business Corporation Act: ORSChapter 60 contains no similar provisions.

65.334 VACANCY ON BOARD

(1) Unless the articles or bylaws provide otherwise, and exceptas provided in subsections (2) and (3) of this section, if a vacancyoccurs on a board of directors, including a vacancy resulting froman increase in the number of directors:

(a) The members entitled to vote for directors, if any, may fillthe vacancy. If the vacant office was held by a director elected by aclass, chapter or other organizational unit or by region or othergeographic grouping, only members of the class, chapter, unit orgrouping are entitled to vote to fill the vacancy if it is filled by themembers;

(b) The board of directors may fill the vacancy; or

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(c) If the directors remaining in office constitute fewer than aquorum of the board of directors, they may fill the vacancy by theaffirmative vote of a majority of all the directors remaining inoffice.

(2) Unless the articles or bylaws provide otherwise, if a vacantoffice was held by an appointed director, only the person who appointed the director may fill the vacancy.

(3) If a vacant office was held by a designated director, the vacancy shall be filled as provided in the articles or bylaws. In theabsence of an applicable article or bylaw provision, the vacancymay not be filled by the board.

(4) A vacancy that will occur at a specific later date, by reason ofa resignation effective at a later date under ORS 65.321 (2) orotherwise, may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs. [1989 c.1010§ 80]


(1) Proposed Changes to the Model Act: Minor wordingchanges have been made for consistency.. (2) Effec~ive Changes from Chapter 61 Provisions: The proposalIS more detaIled than ORS 61.131 and provides a specific mechanism for replacing appointed and designated directors.

(3) Relationship to the Oregon Business Corporation Act: Theproposal generally tracks ORS 60.331, with differences to reflect thedistinctions between members and shareholders, and the absence ofdesignated and appointed directors and private corporations.

65.335 COMPENSATION OF DIRECTORS

Unless the articles or bylaws provide otherwise, the board of directors may fix the compensation of directors. [1989 c.1010 § 81]


(1) Proposed Changes to the Model Act: None.(2) Effective Changes from Chapter 61 Provisions: Part of ORS

61.165 corresponds to the proposal.(3) Relationship to the Oregon Business Corporation Act: The

proposal parallels ORS 60.334.

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ORS 65.341

Note - The proposal omits Model Act § 8.13 (financially disinterested majority-public benefit corporation).

(MEETINGS AND ACTION OF BOARD)

65.337 REGULAR AND SPECIAL MEETINGS

(1) If the time and place of a director's meeting is fixed by thebylaws or is regularly scheduled by the board of directors, themeeting is a regular meeting. All other meetings are specialmeetings.

(2) The board of directors may hold regular or special meetingsin or out of this state.

(3) Unless the articles or bylaws provide otherwise, the board ofdirectors may permit any or all directors to participate in a regularor special meeting by, or conduct the meeting through, use of anymeans of communication by which all directors participating maysimultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present inperson at the meeting. [1989 c.1010 § 82]


(1) Proposed Changes to the Model Act: Wording changes havebeen made for consistency with the Business Corporation Act andto clarify that while regular meetings include regularly scheduledmeetings of the board, they do not include all meetings of the boardof directors.

(2) Effective Changes from Chapter 61 Provisions: The proposalspells out what constitutes regular and special meetings of the boardof directors. Otherwise, the proposal closely tracks the first portionof ORS 61.145(1) and 61.145(2).

(3) Relationship to the Oregon Business Corporation Act: Theproposal generally tracks ORS 60.337.

65.341 ACTION WITHOUT MEETING

(1) Unless the articles or bylaws provide otherwise, action required or permitted by this chapter to be taken at the board of directors' meeting may be taken without a meeting if the action istaken by all members of the board of directors. The action shall beevidenced by one or more written consents describing the action

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taken, signed by each director, and included in the minutes or filedwith the corporate records reflecting the action taken.

(2) Action taken under this section is effective when the last director signs the consent, unless the consent specifies an earlier orlater effective date.

(3) A consent signed under this section has the effect of a meeting vote and may be described as such in any document. [1989c.l0l0 § 83]


(1) Proposed Changes to the Model Act: Minor wordingchanges have been made for consistency.

(2) Effective Changes from Chapter 61 Provisions: The proposalis more detailed than ORS 61.935, most specifically with respect tothe effective date of actions taken without a meeting.


65.344 CALL AND NOTICE OF MEETINGS

(1) Unless the articles, bylaws or this chapter provide otherwise,regular meetings of the board may be held without notice of thedate, time, place or purpose of the meeting.

(2) Unless the articles of incorporation or bylaws provide for alonger or shorter period, special meetings of the board must be preceded by at least two days' notice to each director of the date, timeand place of the meeting. Unless this chapter provides otherwise,the notice need not describe the purposes of the special meetingunless required by the articles of incorporation or bylaws.

(3) Unless the articles or bylaws provide otherwise, the presidingofficer of the board, the president or 20 percent of the directorsthen in office may call and give notice of a meeting of the board.[1989 c.l0l0 § 84]


(1) Proposed Changes to the Model Act: Wording changes havebeen made in subsections (1) and (2) to parallel ORS 60.344. ModelAct subsection (c) has been omitted.

(2) Effective Changes from Chapter 61 Provisions: The proposaldifferentiates between notice required for regular and special meet-

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ORS 65.351

ings. Unless the articles or bylaws provide otherwise, regular meetings may be held without notice and special meetings may be heldon two days notice. Requirements relating to the contents of suchnotice are contained in other sections. For example, ORS65.534(5), Model Act § 12.02(e), contains notice requirements forsales of assets other than in the regular course of business.

(3) Relationship to the Oregon Business Corporation Act: Theproposal tracks ORS 60.344, but adds a call of meeting provision.

65.347 WAIVER OF NOTICE

(1) A director may at any time waive any notice required by thischapter, the articles of incorporation or bylaws. Except as providedin subsection (2) of this section, the waiver must be in writing, mustbe signed by the director entitled to the notice, must specify themeeting for which notice is waived and must be filed with the minutes or the corporate records.

(2) A director's attendance at or participation in a meetingwaives any required notice to the director of the meeting unless thedirector, at the beginning of the meeting, or promptly upon the director's arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to anyaction taken at the meeting. [1989 c.l0l0 § 85]


(1) Proposed Changes to the Model Act: The Model Act hasbeen changed to correspond to the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: Subsection(1) restates the waiver provisions in ORS 61.930. Subsection (2)expands the provisions on the effect of attendance of a director at ameeting currently in ORS 61.145(1).


65.351 QUORUM AND VOTING

(1) Unless the articles of incorporation or bylaws require agreater number or a lesser number as authorized under subsection(2) of this section, a quorum of a board of directors consists of:

(a) If the corporation has a fixed board size, a majority of thefixed number of directors; or

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ORS 65.351

(b) If the corporation has a variable-range size board, a majorityof the number of directors prescribed, or if no number is prescribed,a majority of the number in office immediately before the meetingbegins.

(2) The articles of incorporation or bylaws may authorize a quorum of a board of directors to consist of no fewer than one-third ofthe fixed or prescribed number of directors determined under subsection (1) of this section.

(3) If a quorum is present when a vote is taken, the affirmativevote of a majority of directors present when the act is taken is theact of the board of directors unless the articles of incorporation orbylaws require the vote of a greater number of directors. A directoris considered present regardless of whether the director votes orabstains from voting.

(4) A director who is present at a meeting of the board of directors or a committee of the board of directors when corporate actionis taken is deemed to have assented to the action taken unless:

(a) The director objects at the beginning of the meeting, orpromptly upon the director's arrival, to holding the meeting ortransacting the business at the meeting;

(b) The director's dissent or abstention from the action taken isentered in the minutes of the meeting; or

(c) The director delivers written notice of dissent or abstentionto the presiding officer of the meeting before its adjournment or tothe corporation immediately after adjournment of the meeting. Theright of dissent or abstention is not available to a director who votesin favor of the action taken. [1989 c.l0l0 § 86; 1991 c.231 § 4]


(1) Proposed Changes to the Model Act: Changes have beenmade for consistency with the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: The proposalis substantively similar to ORS 61.135.

(3) Relationship to the Oregon Business Corporation Act: Theproposal generally parallels ORS 60.351 but is less detailed. However, ORS 60.351 contains several provisions relating to when a director is not deemed to have assented to the action of the board ofdirectors.

106

ORS 65.354


The amendment is intended to make it clear that a director whoabstains from voting will be considered present.

65.354 COMMITTEES

(1) Unless the articles or bylaws provide otherwise, a board ofdirectors may create one or more committees of the board of directors which exercise the authority of the board of directors and appoint members of the board to serve on them or designate themethod of selecting committee members. Each committee shall consist of two or more directors, who serve at the pleasure of the boardof directors.

(2) The creation of a committee and appointment of directors tothe committee or designation of a method of selecting committeemembers must be approved by the greater of:

(a) A majority of all the directors in office when the action istaken; or

(b) The number of directors required by the articles or bylaws totake action under ORS 65.351.

(3) ORS 65.337 to 65.351, governing meetings, action withoutmeetings, notice and waiver of notice, and quorum and voting requirements of the board of directors, apply to committees and theirmembers as well.

(4) Except as provided in subsection (5) of this section, to theextent specified by the board of directors or in the articles or bylaws, each committee of the board may exercise the authority of theboard of directors.

(5) A committee of the board may not:(a) Authorize distributions;(b) Approve or recommend to members dissolution, merger or

the sale, pledge or transfer of all or substantially all of the corporation's assets;

(c) Elect, appoint or remove directors or fill vacancies on theboard or on any of its committees; or

(d) Adopt, amend or repeal the articles or bylaws.(6) The creation of, delegation of authority to, or action by a

committee does not alone constitute compliance by a director with

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ORS 65.357

the standards of conduct described in ORS 65.357. [1989 c.1010§ 87]


(1) Proposed Changes to the Model Act: The Model Act hasbeen changed to make the language track the Business CorporationAct and to provide that the board of directors may designate amethod for selecting members of committees.

(2) Effective Changes from Chapter 61 Provisions: The proposalgenerally follows ORS 61.141, but it is more explicit about themechanics of creating and operating committees.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.354, although the two diverge in order toaddress shareholder and member related issues.

(STANDARDS OF CONDUCT)

65.357 GENERAL STANDARDS FOR DIRECTORS

(1) A director shall discharge the duties of a director, includingthe director's duties as a member of a committee:

(a) In good faith;(b) With the care an ordinarily prudent person in a like position

would exercise under similar circumstances; and(c) In a manner the director reasonably believes to be in the best

interests of the corporation.(2) In discharging the duties of a director, a director is entitled

to rely on information, opinions, reports or statements, includingfinancial statements and other financial data, if prepared orpresented by:

(a) One or more officers or employees of the corporation whomthe director reasonably believes to be reliable and competent in thematters presented;

(b) Legal counsel, public accountants or other persons as to matters the director reasonably believes are within the person's professional or expert competence;

(c) A committee of the board of which the director is not a member, as to matters within its jurisdiction, if the director reasonablybelieves the committee merits confidence; or

(d) In the case of religious corporations, religious authorities and

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ORS 65.357

ministers, priests, rabbis or other persons whose position or dutiesin the religious organization the director believes justify relianceand confidence and whom the director believes to be reliable andcompetent in the matters presented.

(3) A director is not acting in good faith if the director hasknowledge concerning the matter in question that makes relianceotherwise permitted by subsection (2) of this section unwarranted.

(4) A director is not liable to the corporation, any member orany other person for any action taken or not taken as a director, ifthe director acted in compliance with this section. The liability of adirector for monetary damages to the corporation and its membersmay be eliminated or limited in the corporation's articles to theextent provided in ORS 65.047 (2)(c).

(5) A director shall not be deemed to be a trustee with respect tothe corporation or with respect to any property held or administered by the corporation, including without limit, property that maybe subject to restrictions imposed by the donor or transferor ofsuch property. [1989 c.1010 § 88]

OFFICIAL CoMMENT TO ORS 65.357 (MODEL ACT § 8.30)

(1) Proposed Changes to the Model Act: The alternate form ofModel Act § 8.30 has been chosen. This form adds a sentence tosubsection (4) permitting the corporation to limit the liability of directors in its articles to the extent provided in ORS 65.047(2)(c),Model Act § 2.02(b)(5).

(2) Effective Changes from Chapter 61 Provisions: The proposalis much broader than current ORS chapter 61. ORS 61.205 establishes a standard for entitlement and indemnity ("in good faith andin a manner the person reasonably believed to be in or not opposedto the best interests of the corporation"), but not a standard of care.ORS 61.218 does not establish a standard of care, but only limitsthe liability of statutorily defined "qualified directors" to acts ofgross negligence or intentional acts.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.357 with two exceptions. ORS 60.357does not contain language permitting the corporation to limit thedirectors' liability in the articles; however, corresponding languageis included in ORS 60.047(2)(c). Second, the proposal adds lan-

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ORS 65.361

guage stating that directors are not deemed to be trustees with respect to property held by the corporation.

65.361 DIRECTOR CONFLICT OF INTEREST

(1) A conflict of interest transaction is a transaction with thecorporation in which a director of the corporation has a direct orindirect interest. A conflict of interest transaction is not voidable orthe basis for imposing liability on the director if the transaction isfair to the corporation at the time it was entered into or is approvedas provided in subsection (2) or (3) of this section.

(2) A transaction in which a director of a public benefit or religious corporation has a conflict of interest may be approved:

(a) By the vote of the board of directors or a committee of theboard of directors if the material facts of the transaction and thedirector's interest are disclosed or known to the board of directorsor committee of the board of directors; or

(b) By obtaining approval of the:(A) Attorney General; or(B) The circuit court in an action in which the Attorney General

is joined as party.(3) A transaction in which a director of a mutual benefit corpora

tion has a conflict of interest may be approved:(a) In advance by the vote of the board of directors or a commit

tee of the board of directors if the material facts of the transactionand the director's interest were disclosed or known to the board ofdirectors or a committee of the board of directors; or

(b) If the material facts of the transactions and the director's interest were disclosed or known to the members and they authorized,approved or ratified the transaction.

(4) For the purposes of this section, a director of the corporationhas an indirect interest in a transaction if:

(a) Another entity in which the director has a material interestor in which the director is a general partner is a party to the transaction; or

(b) Another entity of which the director is a director, officer ortrustee is a party to the transaction, and the transaction is or shouldbe considered by the board of directors of the corporation.

(5) For purposes of subsections (2) and (3) of this section, a con~

flict of interest transaction is authorized, approved or ratified if it

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ORS 65.361

receives the affirmative vote of a majority of the directors on theboard of directors or on the committee who have no direct or indirect interest in the transaction. A transaction may not be authorized, approved or ratified under this section by a single director. Ifa majority of the directors who have no direct or indirect interest inthe transaction votes to authorize, approve or ratify the transaction,a quorum is present for the purpose of taking action under this section. The presence of, or a vote cast by, a director with a direct orindirect interest in the transaction does not affect the validity ofany action taken under paragraph (a) of subsection (2) or paragraph(a) of subsection (3) of this section if the transaction is otherwiseapproved as provided in subsection (2) or (3) of this section.

(6) For purposes of paragraph (b) of subsection (3) of this section, a conflict of interest transaction is authorized, approved orratified by the members if it receives a majority of the votes entitled to be counted under this subsection. Votes cast by or votedunder the control of a director who has a direct or indirect interestin the transaction, and votes cast by or voted under the control ofan entity described in subsection (4) of this section may be countedin a vote of members to determine whether to authorize, approve orratify a conflict of interest transaction under paragraph (b) of subsection (3) of this section. A majority of the members, whether ornot present, that are entitled to be counted in a vote on the transaction under this subsection constitutes a quorum for the purpose oftaking action under this section.

(7) The articles, bylaws or a resolution of the board may imposeadditional requirements on conflict of interest transactions. [1989c.1010 § 89]


(1) Proposed Changes to the Model Act: The text of the ModelAct has been changed to delete the specific reference to the goodfaith belief and fairness requirement in subsection (b)(I)(ii), sincesuch a duty is generally covered by ORS 65.357, Model Act § 8.30.Other wording changes have been made for internal consistencyand consistency with the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: ORS Chapter 61 contains no conflict of interest provisions.

(3) Relationship to the Oregon Business Corporation Act: This

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ORS 65.364

provision corresponds to ORS 60.361, but differs substantively because it distinguishes between the different categories of nonprofitcorporations.

65.364 LoANS TO OR GUARANTEES FOR DIRECTORS ANDOFFICERS

(1) Public benefit and religious corporations may not make aloan, guarantee an obligation or modify a preexisting loan or guarantee to or for the benefit of a director or officer of the corporation,except as stated in this section. Unless prohibited by its articles orbylaws, a public benefit or religious corporation may make a loan,guarantee an obligation or modify a preexisting loan or guaranteeto or for the benefit of a director or officer as part of a recruitmentpackage, for a total period not to exceed three years, provided that:

(a) Approval of the loan, guarantee or modification is obtained inthe manner provided in ORS 65.361 (2) and (5) for approval of issues involving director conflicts of interest;

(b) Notice of the loan, guarantee or modification is given to themembers of the corporation in the manner provided in ORS 65.784for notice of certain acts of indemnification; and

(c) Twenty or more days before the loan, guarantee or modification is to become binding on the corporation, written notice hasbeen given to the Attorney General of the proposed recruitmentpackage for the director or officer, including identification of theamount and character of all items of compensation and a separatestatement of the amount and terms of any such loan, guarantee ormodification.

(2) A mutual benefit corporation may not lend money to or guarantee the obligation of a director of the corporation unless:

(a) The particular loan or guarantee is approved by a majority ofthe votes of members entitled to vote, excluding the votes of members under the control of the benefited director; or

(b) The corporation's board of directors determines that the loanor guarantee benefits the corporation and either approves the specific loan or guarantee or a general plan authorizing the loans andguarantees.

(3) The fact that a loan or guarantee is made in violation of thissection does not affect the borrower's liability on the loan. [1989c.1010 § 90; 1991 c.231 § 6]

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ORS 65.367


(1) Proposed Changes to the Model Act: The Model Act hasbeen changed to distinguish between public benefit and religiouscorporations on the one hand and mutual benefit corporations onthe other hand; mutual benefit corporations are governed by standards equivalent to those in the Business Corporation Act.

(2) Effective Changes from Chapter 61 Pro.visions: F.or pu~licbenefit and religious corporations, the proposal IS substantIvely SImilar to the first sentence of ORS 61.170, but extends to guarantees aswell as loans. For mutual benefit corporations, the proposal gives aprocedure for approving loans or guarantees; subsection (3) addsthat a loan or guarantee violating this section is nonetheless

enforceable.(3) Relationship to the Oregon Business Corporation Act: With

respect to public benefit corporations and religious corporations, theproposal is more restrictive than ORS 60.364, which permits loansto directors if certain criteria are met.


The amendment would allow loans and guarantees to or for thebenefit of directors and officers of public benefit and religious corporations in connection with recruitment packages, provided that approval by special procedures required in conflict of interesttransactions is obtained, and the modification is binding on the corporation only after 20 days have elapsed following notice to the At-

torney General.

65.367 LIABILITY FOR UNLAWFUL DISTRIBUTIONS

(1) Unless a director complies with the applicable standards ofconduct described in ORS 65.357, a director who votes for or assents to a distribution made in violation of this chapter or the articles of incorporation is personally liable to the corporation for theamount of the distribution that exceeds what could have been distributed without violating this chapter.

(2) A director held liable for an unlawful distribution under subsection (1) of this section is entitled to contribution:

(a) From every other director who voted for or assented to thedistribution without complying with the applicable standards ofconduct described in ORS 65.357; and

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(b) From each person who received an unlawful distribution forthe amount of the distribution whether or not the person receivingthe distribution knew it was made in violation of this chapter or thearticles of incorporation. [1989 c.l0l0 § 91]


(l) Proposed Changes to the Model Act: Minor languagechanges have been made to track the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: The proposalbroadens ORS 61.170, pertaining to directors' liability for unlawfulloans, into a general provision covering directors' liability for unlawful distributions.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.367. However, the term "distribution" isdefined very differently in the two acts.

65.369 LIABILITY OF QUALIFIED DIRECTORS

(1) The civil liability of a qualified director for the performanceor nonperformance of the director's duties shall be limited to grossnegligence or intentional misconduct.·

(2) This section does not affect the civil liability of the entitywhich a qualified director serves.

(3) For the purposes of this section, "qualified director" means aperson who serves without compensation for personal services as:

(a) A member of a board or commission of the state or a governmental subdivision for the purpose of setting policy and controllingor otherwise overseeing the activities or functional responsibilitiesof the board or commission but, notwithstanding ORS 30.265 (2),the entity is not thereby rendered immune from liability;

(b) An officer, director or member of an executive board for thepurpose of setting policy and controlling or otherwise overseeingthe activities or functional responsibilities of a nonprofit corporation, unincorporated association or nonprofit cooperative corporation that has as its primary purpose:

(A) Religion;(B) Charity;(C) Benevolence;(D) Providing goods or services at no charge to the general

public;

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ORS 65.369

(E) Education;(F) Scientific activity;(G) Medical or hospital services at reduced costs; or(H) Engaging in activities of the nature specified in section 501

of the Internal Revenue Code of 1986, as amended;(c) A director for the purpose of setting policy and controlling or

otherwise overseeing the activities or functional responsibilities ofan organization which acts as an advocate for its members andwhich has as its members individuals or organizations that are:

(A) Members of a particular trade or industry; or(B) Members of the business community of a particular munici

pality or area of the state; or(d) An officer, director or member of an executive board for the

purpose of setting policy and controlling or otherwise overseeingthe activities or functional responsibilities of a nonprofit corporation, unincorporated association or nonprofit cooperative corporation composed of owners or lessees of units or interests in anycondominium submitted to the provisions of ORS 100.005 to100.625, any planned community as defined in ORS 94.550 (9), anytimeshare property as defined in ORS 94.803 (26), any residentialcooperative community or any other residential or commercial common interest real estate community.

(4) An otherwise qualified director shall not be considered to becompensated for personal services if the director receives paymentonly for actual expenses incurred in attending meetings or performing a director's duties or receives a stipend which is paid only tocompensate the director for average expenses incurred over thecourse of a year. [1989 c.l0l0 §§ 92, 92a; 1991 c.64 § 4; 1991 c.81§ 1; 1991 c.231 § 5]


(1) Proposed Changes to the Model Act: No such provision appears in the Model Act.

(2) Effective Changes from Chapter 61 Provisions: Subsection(d) added. This section carries forward ORS 61.218 that was addedin 1987. The phrase "governmental subdivision" is used for terminological consistency.

(3) Relationship to the Oregon Business Corporation Act: Nocounterpart exists in Chapter 60.

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ORS 65.371

(4) Other Comments: This section provides minimal exoneration for volunteer directors and officers. Subsection (4) is similar tothe definition of "uncompensated officer" in ORS 65.(XH(36),Model Act § 1.40.

(OFFICERS)

65.371 REQUIRED OFFICERS

(1) A corporation shall have a president, a secretary and suchother officers as are elected or appointed by the board or by anyother person as may be authorized in the articles or bylaws, provided that the articles of incorporation or bylaws may designateother titles in lieu of president and secretary.

(2) The bylaws or the board shall delegate to one of the officersresponsibility for preparing minutes of the directors' and members'meetings and for authenticating records of the corporation.

(3) The same individual may simultaneously hold more than oneoffice in a corporation. [1989 c.1010 § 93; 1991 c.231 § 7]


(1) Proposed Changes to the Model Act: Language has been added to clarify that corporations may use nontraditional names fordesignation of officers. This is clear in the existing law. The comments to the Model Act indicate that the Model Act is intended tohave the same result.

(2) Effective Changes from Chapter 61 Provisions: The proposalis similar to ORS 61.151, but contains no language relating to theterms of officers. It does provide that the bylaws or board shalldelegate to an officer responsibility for preparing minutes and authenticating records.

(3) Relationship to the Oregon Business Corporation Act: Theproposal generally parallels ORS 60.371, although the BusinessCorporation Act requires the secretary to prepare minutes and authenticate records. The proposal also allows use of other titles inlieu of president and secretary since many nonprofits use nontraditional titles.


The amendment clarifies that officers may be elected as well as

116

ORS 65.377

appointed by the board, and that the articles or bylaws may authorize others to elect or appoint officers as well.

65.374 DUTIES AND AUTHORITY OF OFFICERS

Each officer has the authority and shall perform the duties setforth in the bylaws or, to the extent consistent with the bylaws, theduties and authority prescribed by the board of directors or by direction of an officer authorized by the board of directors to prescribe the duties of other officers. [1989 c.1010 § 94]


(1) Proposed Changes to the Model Act: Minor languagechanges have been made to parallel the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: ORS Chapter 61 has no description of the duties of officers.


65.377 STANDARDS OF CONDUCT FOR OFFICERS

(1) An officer shall discharge the officer's duties:(a) In good faith;(b) With the care an ordinarily prudent person in a like position

would exercise under similar circumstances; and(c) In a manner the officer reasonably believes to be in the best

interests of the corporation.(2) In discharging the duties of an officer, an officer is entitled to

rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared orpresented by:

(a) One or more officers or employees of the corporation whomthe officer reasonably believes to be reliable and competent in thematters presented;

(b) Legal counsel, public accountants or other persons as to matters the officer reasonably believes are within the person's professional or expert competence; or

(c) In the case of religious corporations, religious authorities andministers, priests, rabbis or other persons whose position or dutiesin the religious organization the officer believes justify reliance and

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ORS 65.381

confidence and whom the officer believes to be reliable and competent in the matters presented.

(3) An officer is not acting in good faith if the officer has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (2) of this section unwarranted.

(4) An officer is not liable to the corporation, any member orother person for any action taken or not taken as an officer if theofficer acted in compliance with this section. The liability of theofficer for monetary damages to the corporation and its membersmay be eliminated or limited in the corporation's articles to theextent provided in ORS 65.047 (2)(c). [1989 c.l0l0 § 95]


(1) Proposed Changes to the Model Act: Subsection (1) has beenchanged to cover officers' duties generally, rather than only discretionary duties. Subsection (4) has been expanded to permit corporations to limit officers' liability in the articles of incorporation tothe same extent the articles may limit directors' liability.

(2) Effective Changes from Chapter 61 Provisions: ORS Chapter 61 has no provisions setting a standard of conduct for officers.The proposal parallels the standard of conduct of directors.

(3) Relationship to the Oregon Business Corporation Act: Theproposal generally parallels ORS 60.377.

65.381 RESIGNATION AND REMOVAL OF OFFICERS

(1) An officer may resign at any time by delivering notice to thecorporation. A resignation is effective when the notice is effectiveunder ORS 65.034 unless the notice specifies a later effective date.If a resignation is made effective at a later date and the corporationaccepts the later effective date, its board of directors or any otherperson as authorized under the articles or bylaws may fill the pending vacancy before the effective date if the board or any other person provides that the successor does not take office until theeffective date.

(2) A board of directors or any other person authorized underthe articles or bylaws to elect or appoint an officer may remove anyofficer the board or any other person is entitled to elect or appoint,at any time with or without cause.

(3) Once delivered, a notice of resignation is irrevocable unless

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ORS 65.384

revocation is permitted by the board of directors. [1989 c.l0l0§ 96; 1991 c.231 § 8]


(1) Proposed Changes to the Model Act: The Model Act hasbeen changed to parallel the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: The proposalbroadens ORS 61.155 to cover resignation as well as removal.



The amendments are intended to conform to the change proposed for ORS 65.227(1).

65.384 CONTRACT RIGHTS OF OFFICERS

(1) The appointment of an officer does not itself create contractrights.

(2) Removal or resignation of an officer does not affect the contract rights, if any, of the corporation or the officer. [1989 c.l0l0§ 97]


(1) Proposed Changes to the Model Act: Language changes havebeen made to make the Model Act consistent with the BusinessCorporation Act.

(2) Effective Changes from Chapter 61 Provisions: The proposalexpands upon the last sentence of ORS 61.155 to make it clear thatthe appointment of an officer does not itself create contractualrights and that removal or resignation do not affect either party'scontractual rights.


Note - The proposal omits Model Act § 8.45 (officers' authority toexecute documents).

119

ORS 65.387

(INDEMNIFICATION)

65.387 DEFINITIONS FOR ORS 65.387 TO 65.414

As used in ORS 65.387 to 65.414:(1) "Corporation" includes any domestic or foreign predecessor

entity of a corporation in a merger or other transaction in which thepredecessor's existence ceased upon consummation of thetransaction.

(2) "Director" means an individual who is or was a director of a~orporation o~ an individual who, while a director of a corporation,IS or was servmg at the corporation's request as a director, officer,partner, trustee, employee, or agent of another foreign or domesticbusiness or nonprofit corporation, partnership, joint venture, trust,employee benefit plan or other enterprise. A director is consideredto be serving an e~ployee benefit plan at the corporation's requestif the director's duties to the corporation also impose duties on orotherwise involve services by, the director to the plan or to pariicipants in or beneficiaries of the plan. "Director" includes, unless thecontext requires otherwise, the estate or personal representative ofa director. .

(3) "Expenses" include attorney fees.(4) "Liability" means the obligation to pay a judgment, settle

ment, penalty, fine, including an excise tax assessed with respect toan employee benefit plan, or reasonable expenses actually incurredwith respect to a proceeding.

(5) "Officer" means an individual who is or was an officer of a~orporation o~ an individual who, while an officer of a corporation,IS or was servmg at the corporation's request as a director, officer,partner, trustee, employee or agent of another foreign or domesticcorporation, partnership, joint venture, trust, employee benefit planor other enterprise. An officer is considered to be serving an employee benefit plan at the corporation's request if the officer's duties to the corporation also impose duties on or include services bythe officer to the employee benefit plan or to participants in or beneficiaries of the plan. "Officer" includes, unless the context requires otherwise, the estate or personal representative of an officer.

(6) "Party" includes an individual who was, is or is threatened tobe made a named defendant or respondent in a proceeding.

(7) "Proceeding" means any threatened, pending or completed

120

ORS 65.391

action, suit or proceeding whether civil, criminal, administrative orinvestigative and whether formal or informal. [1989 c.1010 § 98]


(1) Proposed Changes to the Model Act: The Model Act provision has been modified to parallel the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: ORS Chapter 61 has no definitions relating particularly to indemnification, butORS 61.205 has phrases similar to much of the defined material in

the proposal.(3) Relationship to the Oregon Business Corporation Act: The

proposal parallels ORS 60.387.

65.391 AUTHORITY TO INDEMNIFY

(1) Except as provided in subsection (4) of this section, a corporation may indemnify an individual made a party to a proceedingbecause the individual is or was a director against liability incurredin the proceeding if:

(a) The conduct of the individual was in good faith;(b) The individual reasonably believed that the individual's con

duct was in the best interests of the corporation, or at least notopposed to its best interests; and

(c) In the case of any criminal proceeding, the individual had noreasonable cause to believe the conduct of the individual was

unlawful.(2) A director's conduct with respect to an employee benefit plan

for a purpose the director reasonably believed to be in the interestsof the participants in and beneficiaries of the plan is conduct thatsatisfies the requirements of paragraph (b) of subsection (1) of this

section.(3) The termination of a proceeding by judgment, order, settle-

ment, conviction or upon a plea of nolo contendere or its equivalentis not, of itself, determinative that the director did not meet thestandard of conduct described in this section.

(4) A corporation may not indemnify a director under this

section:(a) In connection with a proceeding by or in the right of the cor-

poration in which the director was adjudged liable to the corpora-

tion; or

121

ORS 65.394

(b) In connection with any other proceeding charging improperpersonal benefit to the director in which the director was adjudgedliable on the basis that personal benefit was improperly received bythe director.

(5) Indemnification permitted under this section in connectionwith a proceeding by or in the right of the corporation is limited toreasonable expenses incurred in connection with the proceeding.[1989 c.l0l0 § 99]


(1) Proposed Changes to the Model Act: The Model Act hasbeen modified to parallel the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: The provisions are similar in scope to those enacted as part of the 1987amendments to Chapter 61.


65.394 MANDATORY INDEMNIFICATION

Unless limited by its articles of incorporation, a corporation shallindemnify a director who was wholly successful, on the merits orotherwise, in the defense of any proceeding to which the directorwas a party because of being a director of the corporation againstreasonable expenses actually incurred by the director in connectionwith the proceeding. [1989 c.l0l0 § 100]


(1) Proposed Changes to the Model Act: Minor languagechanges have been made to parallel the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: The proposalcorresponds to ORS 61.205(3), but adds the requirement that thedirector be wholly successful, on the merits or otherwise, to be entitled to mandatory indemnification.


65.397 ADVANCE FOR EXPENSES

(1) A corporation may pay for or reimburse the reasonable ex-

122

ORS 65.401

penses incurred by a director who is a party to a proceeding in advance of final disposition of the proceeding if:

(a) The director furnishes the corporation a written affirmationof the director's good faith belief that the director has met the standard of conduct described in ORS 65.391; and

(b) The director furnishes the corporation a written undertaking,executed personally or on the director's behalf, to repay the advance if it is ultimately determined that the director did not meetthe standard of conduct.

(2) The undertaking required by paragraph (b) of subsection (1)

of this section must be an unlimited general obligation of the director but need not be secured and may be accepted without referenceto financial ability to make repayment.

(3) Any authorization of payments under this section may bemade by provision in the articles of incorporation or bylaws, by aresolution of the members or board of directors or by contract.[1989 c.l0l0 § 101]



(2) Effective Changes from Chapter 61 Provisions: The proposalexpands on ORS 61.215 and adds as a prerequisite that the directorprovide a written affirmation concerning the director's conduct.


65.401 COURT-ORDERED INDEMNIFICATION

Unless the corporation's articles of incorporation provide otherwise, a director of the corporation who is a party to a proceedingmay apply for indemnification to the court conducting the proceeding or to another court of competent jurisdiction. On receipt of anapplication, the court after giving any notice the court considersnecessary may order indemnification in the amount it considersproper if it determines:

(1) The director is entitled to mandatory indemnification underORS 65.394, in which case the court shall also order the corporation to pay the director's reasonable expenses incurred to obtaincourt-ordered indemnification; or

123

i...J

»

ORS 65.404

(2) The director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not thedirector met the standard of conduct set forth in ORS 65.391 (1) orwas adjudged liable as described in ORS 65.391 (4), whether theliability is based on a judgment, settlement or proposed settlementor otherwise. [1989 c.l0l0 § 102]



(2) Effective Changes from Chapter 61 Provisions: Chapter 61contains no provisions providing standards for court-orderedindemnification.


65.404 DETERMINATION AND AUTHORIZATION OFINDEMNIFICATION

(1) A corporation may not indemnify a director under ORS65.391 unless authorized in the specific case after a determinationhas been made that indemnification of the director is permissible inthe circumstances because the director has met the standard of conduct set forth in ORS 65.391.

(2) A determination that indemnification of a director is permissible shall be made:

(a) By the board of directors by majority vote of a quorum consisting of directors not at the time parties to the proceeding;

(b) If a quorum cannot be obtained under paragraph (a) of thissubsection, by a majority vote of a committee duly designated bythe board of directors, consisting solely of two or more directorsnot at the time parties to the proceeding;

(c) By special legal counsel selected by the board of directors orits committee in the manner prescribed in paragraph (a) or (b) ofthis subsection or, if a quorum of the board cannot be obtainedunder paragraph (a) of this subsection and a committee cannot bedesignated under paragraph (b) of this subsection, the special legalcounsel shall be selected by majority vote of the full board of directors including directors who are parties to the proceeding; or

(d) By the members of a mutual benefit corporation, but direc-

124

ORS 65.407

tors who are at the time parties to the proceeding may not vote onthe determination.

(3) Authorization of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if thedetermination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shallbe made by those entitled under paragraph (c) of subsection (2) ofthis section to select counsel.

(4) A director of a public benefit corporation may not be indemnified until 20 days after the effective date of written notice to theAttorney General of the proposed indemnification. [1989 c.l0l0§ 103]


(1) Proposed Changes to the Model Act: The Model Act hasbeen modified to parallel the Business Corporation Act, with theexception that Model Act subsections (b)(4) and (d), pertaining tomutual benefit corporations and public benefit corporations, havebeen retained.

(2) Effective Changesfrom Chapter 61 Provisions: The proposalcorresponds to ORS 61.215.


65.407 INDEMNIFICATION OF OFFICERS, EMPLOYEES ANDAGENTS

Unless a corporation's articles of incorporation provideotherwise:

(1) An officer of the corporation is entitled to mandatory indemnification under ORS 65.394, and is entitled to apply for court-ordered indemnification under ORS 65.401 in each case, to the sameextent as a director under ORS 65.394 and 65.401.

(2) The corporation may indemnify and advance expenses underORS 65.387 to 65.411 an officer, employee or agent of the corporation who is not a director to the same extent as to a director. [1989c.l0l0 § 104]

125

ORS 65.411



(2) Effective Changes from Chapter 61 Provisions: Chapter 61does not contain a separate section covering indemnification of officers, employees and agents. Such individuals are included withdirectors under the current statute. .


65.411 INSURANCE

A corporation may purchase and maintain insurance on behalf ofan individual against liability asserted against or incurred by theindividual who is or was a director, officer, employee or agent of thecorporation, or who, while a director, officer, employee or agent ofthe corporation, is or was serving at the request of the corporationas a director, officer, partner, trustee, employee or agent of anotherforeign or domestic business or nonprofit corporation, partnership,joint venture, trust, employee benefit plan or other enterprise. Thecorporation may purchase and maintain the insurance even if thecorporation has no power to indemnify the individual against thesame liability under ORS 65.391 or 65.394. [1989 c.l0l0 § 105]


(1) Proposed Changes to the Model Act: The Model Act hasbeen modified to track the Business Corporation Act.

(2) Effective Changes from Chapter 61 Provisions: The proposalcorresponds to ORS 61.215.


65.414 ApPLICATION OF ORS 65.387 TO 65.411

(1) The indemnification and provisions for advancement of expenses provided by ORS 65.387 to 65.411 shall not be deemed exclusive of any other rights to which directors, officers, employees oragents may be entitled under the corporation's articles of incorporation or bylaws, any agreement, general or specific action of itsboard of directors, vote of members or otherwise, and shall continueas to a person who has ceased to be a director, officer, employee or

126

L _

ORS 65.414

agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Specifically and not by way of limitation, a corporation shall have the power to make or agree to makeany further indemnification, including advancement of expenses, of:

(a) Any director as authorized by the articles of incorporation,any bylaws approved, adopted or ratified by the members or anyresolution or agreement approved, adopted or ratified, before or after such indemnification or agreement is made, by the members,provided that no such indemnification shall indemnify any directorfrom or on account of acts or omissions for which liability could notbe eliminated under ORS 65.047 (2)(c); and

(b) Any officer, employee or agent who is not a director as authorized by its articles of incorporation or bylaws, general or specific action of its board of directors or agreement. Unless thearticles of incorporation, or any such bylaws, agreement or resolution provide otherwise, any determination as to any further indemnity under this paragraph shall be made in accordance with ORS65.404.

(2) If articles of incorporation limit indemnification or advanceof expenses, any indemnification and advance of expenses are validonly to the extent consistent with the articles of incorporation.

(3) ORS 65.387 to 65.411 do not limit a corporation's power topayor reimburse expenses incurred by a director in connectionwith the director's appearance as a witness in a proceeding at a timewhen the director has not been made a named defendant or respondent to a proceeding.

(4) A report of indemnification must be made in accordance withORS 65.784. [1989 c.l0l0 § 106; 1991 c.231 § 9]


(1) Proposed Changes to the Model Act: The proposal deviatesgreatly from the Model Act to adopt the approach of the BusinessCorporation Act.

(2) Effective Changes from Chapter 61 Provisions: The proposalexpands upon and goes further than ORS 61.215(3).


127

ORS 65.431


The new provision is designed to serve as an aid in locating therelated reporting provisions.

AMENDMENT OF ARTICLES OF INCORPORATION ANDBYLAWS

(AMENDMENT OF ARTICLES OF INCORPORATION)

65.431 AUTHORITY

(1) A corporation may amend its articles of incorporation at anytime to add, change or delete any provision if the articles of incorporation as amended would be permitted under ORS 65.431 to65.467 as of the effective date of the amendment.

(2) A corporation designated on the records of the Office of theSecretary of State as a public benefit or religious corporation mayamend or restate its articles of incorporation so that it becomesdesignated as a mutual benefit corporation only if notice, includinga copy of the proposed amendment or restatement, has been delivered to the Attorney General at least 20 days before consummationof the amendment or restatement. [1989 c.1010 § 107]


(1) Proposed Changes to the Model Act: This section has beenreworded to follow the language of the Business Corporation Act.This eliminates the awkward reference to the power to "change aprovision that is required" which may suggest the provision is notactually required. An additional subsection has been added at therequest of the Attorney General, requiring notice to the AttorneyGeneral 20 days before a corporation designated as a public benefitor religious corporation may amend or restate its articles to becomea mutual benefit corporation.

(2) Effective Changes from Chapter 61 Provisions: The languageofORS 61.355 does not specifically refer to amendments which add,change, or delete provisions. It also refers to provisions which are"lawful" rather than provisions which are "permitted." The substantive effect, however, of ORS 61.355 and of Model Act § 10.01,as revised in ORS 65.431, is the same, except for the added requirement of 20 days notice to the Attorney General of certainamendments.

128

ORS 65.434

(3) Relationship to the Oregon Business Corporation Act: Thelanguage from ORS 60.431(1) has been adopted.

65.434 AMENDMENT BY DIRECTORS

(1) Unless the articles provide otherwise, a corporation's boardof directors may adopt one or more amendments to the corporation's articles without member approval:

(a) To extend the duration of the corporation if it was incorporated at a time when limited duration was required by law;

(b) To delete the names and addresses of the initial directors andincorporators;

(c) To delete the name and address of the initial registered agentor registered office, if a statement of change is on file with the Office of the Secretary of State;

(d) To delete the mailing address if an annual report has beenfiled with the Office of the Secretary of State;

(e) To change the corporate name by adding, changing or delet-., d " " ""1' 'ted"ing the word "corporation," "mcorporate, company, Iml

or the abbreviation "corp.," "inc,," "co." or "ltd.," for a similarword or abbreviation in the name, or by adding, deleting or changing a geographical attribution to the name;

(f) To include a statement of whether the corporation is a publicbenefit, mutual benefit or religious corporation; or

(g) To make any other change expressly permitted by this chapter to be made by director action.

(2) If a corporation has no members entitled to vote on articles,its incorporators, until directors have been chosen, and thereafterits board of directors, may adopt one or more amendments to thecorporation's articles subject to any approval required pursuant toORS 65.467. The corporation shall provide notice of any meeting atwhich an amendment is to be voted upon. The notice shall be inaccordance with ORS 65.344 (2). The notice must also state thatthe purpose, or one of the purposes, of the meeting is to consider aproposed amendment to the articles and contain or be accompaniedby a copy or summary of the amendment or state the general natureof the amendment. Unless the articles or bylaws require a greatervote or the board of directors requires a greater vote, the amendment must be approved by a majority of the directors in office at thetime the amendment is adopted. Any number of amendments may

129

ORS 65.434

be submitted and voted upon at anyone meeting. [1989 c.1010§ 108; 1991 c.231 § 10]

OFFICIAL COMMENT TO ORS 65.434 (MODEL ACT § to.02)

(1) Proposed Changes to the Model Act: Adds as a new subsec~

tion (1 )(t) the authority of the board to add a statement in the articles indicating which of the three types of nonprofit corporation thecorporation is. Adds as final sentence of subsection (2) languagetaken from ORS 61.361(2). .

(2) Effective Changes from Chapter 61 Erovisions: Subsection(1) sets out a procedure for amendments which the board of directors may adopt without member or third person approval becausethey do not adversely affect members' rights or the rights of thirdpersons specified under ORS 65.467, Model Act § to.30. There isno such procedure in ORS Chapter 61. Subsection (2) applies whenthere are no members with the power to vote on articles. Unlike itscounterpart, ORS 61.361 (1)(b), subsection (2) permits incorporators to adopt amendments until directors have been chosen, requiresthe form of meeting notice to include information on the proposedamendments, and makes adoption subject to approval by specifiedthird persons under ORS 65.467, Model Act § to.30.

(3) Relationship to the Oregon Business Corporation Act: Except for paragraphs (d) and (t), subsection (1) is taken directly fromthe Model Business Corporation Act (ORS 60.434).

(4) Other Comments: Although subsection (1) adds some complexity by specifying the technical instances when member or thirdparty approval is not required, it simplifies the amendment procedure. Note also that subsection (1) is permissive and that its effectcan be avoided, if desired, by a provision in the articles.

Subsection (1)(t) has been added to encourage corporations toelect whether they will be public benefit, mutual benefit, or religiouscorporations. This is expected to be especially helpful during thetransition period after adoption of the new Oregon Nonprofit Corporation Act.

The notice requirement for board meetings at which an amendment will be considered is new but is similar to the notice requirement of ORS 61.361(1)(a) for amendments to be adopted bymembers.

Allowing approval by specified third persons gives greater flexi-

130

,

h-.. _

ORS 65.437

bility. It permits a nonprofit "subsidiary," for example, to have itsarticles subject to the veto of its "parent," without the parent beingthe sole member of the subsidiary.


The new language clarifies that a greater than majority vote maybe required in connection with amendments.

65.437 AMENDMENT BY BOARD OF DIRECTORS AND MEMBERS

(1) Unless this chapter, the articles, bylaws, the members, actingpursuant to subsection (2) of this section, or the board of directorsacting pursuant to subsection (3) of this section, require a greatervote or voting by class, an amendment to a corporation's articles tobe adopted must be approved:

(a) By the board if the corporation is a public benefit or religiouscorporation and the amendment does not relate to the number ofdirectors, the composition of the board, the term of office of directors or the method or way in which directors are elected or selected;

(b) Except as provided in ORS 65.434 (1), by the members entitled to vote on articles by at least two-thirds of the votes cast or amajority of the voting power, whichever is less; and

(c) In writing by any person or persons whose approval is required for an amendment to the articles as authorized by ORS65.467.

(2) The members entitled to vote on articles may condition theamendment's adoption on receipt of a higher percentage of affirmative votes or on any other basis.

(3) If the board initiates an amendment to the articles or boardapproval is required by subsection (1) of this section to adopt anamendment to the articles, the board may condition the amendment's adoption on receipt of a higher percentage of affirmativevotes or on any other basis. For the amendment to be adopted, theboard of directors shall, except in those cases described in paragraph (a) of subsection (1) of this section, adopt a resolution settingforth the proposed amendment and directing that it be submitted toa vote at a meeting of members, which may be either an annual orspecial meeting.

(4) If the board or the members entitled to vote on articles seekto have the amendment approved by such members at a membership

131

ORS 65.437

meeting, the corporation shall give notice to such members of theproposed membership meeting in writing in accordance with ORs65.214. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the proposed amendment andcontain or be accompanied by a copy or summary of theamendment.

(5) If the board or the members entitled to vote on articles seekto have the amendment approved by such members by written consent or written ballot, the material soliciting the approval shall contain or be accompanied by a copy or summary of the amendment[1989 c.l0l0 § 109]


(1) Proposed Changes to the Model Act: Terminology has beenmodified to be consistent with parallel provisions of the BusinessCorporation Act, inclUding the addition to subsection (1) of language based on ORS 60.437(2) (as the Business Corporation TaskForce has suggested it be amended). Because the voting rights ofmembers may vary by class, a more specific reference to the type ofvoting power has been added. .

(2) Effective Changes from Chapter 61 Provisions: Most of theprocedures included in this section are new and thus not included inORS Chapter 61. One change to ORS 61.361(1)(a) is that undersubsection (1)(b) members adopt an amendment at a meeting bytwo-thirds of the votes cast or a majority of the voting power,whichever is less. ORS 61.361(1)(a), by contrast, provides for adoption by two-thirds of the votes present and entitled to be cast at themeeting. The effect of the change is to require less than a two-thirdsvote only when more than three-quarters of the votes entitled to becast are present at the meeting.

New provisions are that (1) the affirmative vote required underthe Act may be increased by the board or by members with thepower to vote on articles, (2) board approval is required for manyarticle amendments for public benefit or religious corporations, (3)approval by any specified third person under ORS 65.467 (ModelAct § 10.30) is required, (4) approval may be made subject to acondition, and (5) notice requirements are specified for a vote bywritten ballot or consent.

(3) Relationship to the Oregon Business Corporation Act: There

132

ORS 65.441

are significant differences from Chapter 60, mainly deriving fromthe different features of nonprofit corporations, e.g., approvals byspecified third parties, approval by the board of a public benefit orreligious corporation, and notice requirements for action by writtenballot.

(4) Other Comments: Making approval subject to a condition isone of the most interesting changes made by this section. It permitsboth the members and the board to require a greater voting majority than otherwise required, or to condition the amendment, for example, on the occurrence of some outside event or third partyaction. The power to condition offers additional flexibility.

65.441 CLASS VOTING BY MEMBERS ON AMENDMENTS

(1) In a public benefit corporation the members of a class entitled to vote on articles are entitled to vote as a class on a proposedamendment to the articles if the amendment would affect the rightsof that class as to voting in a manner different than the amendmentwould affect another class or members of another class.

(2) In a mutual benefit corporation the members of a class entitled to vote on articles are entitled to vote as a class on a proposedamendment to the articles if the amendment would:

(a) Affect the rights, privileges, preferences, restrictions or conditions of that class as to voting, dissolution, redemption or transferof memberships in a manner different than such amendment wouldaffect another class;

(b) Change the rights, privileges, preferences, restrictions or conditions of that class as to voting, dissolution, redemption or transferby changing the rights, privileges, preferences, restrictions or conditions of another class;

(c) Increase or decrease the number of memberships authorizedfor that class;

(d) Increase the number of memberships authorized for anotherclass;

(e) Effect an exchange, reclassification or termination of thememberships of that class; or

(f) Authorize a new class of memberships.(3) In a religious corporation the members of a class entitled to

vote on articles are entitled to vote as a class on a proposed amend-

133

ORS 65.447

ment to the articles only if a class vote is provided for in the articlesor bylaws.

(4) If a class is to be divided into two or more classes as a resultof an amendment to the articles of a public benefit or mutual benefitcorporation, the amendment must be approved by the members ofeach class entitled to vote on articles that would be created by theamendment.

(5) Except as provided in the articles or bylaws of a religiouscorporation, if a class vote is required to approve an amendment tothe articles of a corporation, the amendment must be approved bythe members of the class entitled to vote on articles by two-thirds ofthe votes cast by the class or a majority of the voting power of theclass, whichever is less.

(6) A class of members of a public benefit or mutual benefit corporation is entitled to the voting rights granted by this sectionalthough the articles and bylaws provide that the class may not voteon the proposed amendment. [1989 c.1010 § 110]


(1) Proposed Changes to the Model Act: No major changes areproposed, except clarification of the voting rights of a member because voting rights of members may vary by class.

(2) Effective Changes from Chapter 61 Provisions: This sectiongoes well beyond ORS 61.091 and specifies how class voting willwork for voting on articles in the three types of nonprofitcorporation.

(3) Relationship to the Oregon Business Corporation Act: Language of this section is similar to provisions in ORS 60.441. SeeORS 60.44l(1)(a), (b), (d) and (g) and 60.441(4).

(4) Other Comments: Because the Model Act does provide forclass voting, it is appropriate to include this section to protect thevoting rights of class members.

65.447 ARTICLES OF AMENDMENT

A corporation amending its articles shall deliver for filing to theOffice of the Secretary of State articles of amendment setting forth:

(1) The name of the corporation.(2) The text of each amendment adopted.(3) The date of each amendment's adoption.

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(4) If approval of members was not required, a statement to thateffect and a statement that the amendment was approved by a sufficient vote of the board of directors or incorporators.

(5) If approval by members entitled to vote on articles wasrequired:

(a) The designation and number of members of, and number ofvotes entitled to be cast by, each class entitled to vote separately onthe amendment; and

(b) The total number of votes cast for and against the amendment by each class entitled to vote separately on the amendment.

(6) If approval of the amendment by some person or personsother than the members entitled to vote on articles, the board or theincorporators is required pursuant to ORS 65.467, a statement thatthe approval was obtained. [1989 c.1010 § 111]


(1) Proposed Changes to the Model Act: The deletions proposedmake this section more consistent with the Business CorporationAct, ORS 60.447(2). The deleted language, according to the Official Comment to Model Act § 10.05, supposedly allows reporting ofan approximate vote with a statement that the vote is sufficient forapproval by the class. The language, however, does not carry outthe intent expressed in the comment. It also may be questioned asto what is an "undisputed" vote. There is a modification of "member" to refer to the specific voting rights involved.

(2) Effective Changes from Chapter 61 Provisions: Unlike ORS61.370, the proposal does not include the details of how the amendment was adopted, e.g., for members, at a meeting, with a quorum,by at least two-thirds vote of those present in person or by proxy orby a unanimous written consent. The equivalent details are in ORS65.437, Model Act § 10.03.

(3) Relationship to the Oregon Business Corporation Act: Thissection has been revised to closely follow ORS 60.447.

65.451 RESTATED ARTICLES OF INCORPORATION

(1) A corporation's board of directors may restate its articles ofincorporation at any time with or without approval by members orany other person.

(2) The restatement may include one or more amendments to the

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articles. If the restatement includes an amendment requiring approval by the members entitled to vote on articles or any other person, it must be adopted as provided in ORS 65.437.

(3) If the board seeks to have the restatement approved by suchmembers at a membership meeting, the corporation shall give written notice to such members of the proposed membership meeting inaccordance with ORS 65.214. The notice must also state that thepurpose, or one of the purposes, of the meeting is to consider theproposed restatement and contain or be accompanied by a copy orsummary of the restatement that identifies any amendments orother change it would make in the articles.

(4) If the board seeks to have the restatement approved by suchmembers by written ballot or written consent, the material soliciting the approval shall contain or be accompanied by a copy or summary of the restatement that identifies any amendments or otherchange it would make in the articles.

(5) A restatement requiring approval by such members must beapproved by the same vote as an amendment to articles under ORS65.437.

(6) A corporation restating its articles of incorporation shall deliver to the Office of the Secretary of State for filing articles ofrestatement setting forth the name of the corporation and the textof the restated articles of incorporation together with a certificatesetting forth:

(a) Whether the restatement contains an amendment to the articles requiring approval by the members entitled to vote on articlesor any other person other than the board of directors and, if it doesnot, that the board of directors adopted the restatement, or if therestatement contains an amendment to the articles requiring approval by the members, the information required by ORS 65.447;and

(b) If the restatement contains an amendment to the articles requiring approval by a person whose approval is required pursuant toORS 65.467, a statement that such approval was obtained.

(7) Restated articles of incorporation shall include all statementsrequired to be included in original articles of incorporation exceptthat no statement is required to be made with respect to:

(a) The names and addresses of the incorporators or the initial orpresent registered office or agent; or

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(b) The mailing address of the corporation if an annual reporthas been filed with the Office of the Secretary of State.

(8) Duly adopted restated articles of incorporation supersede theoriginal articles of incorporation and all amendments to them.

(9) The Secretary of State may certify restated articles of incorporation, as the articles of incorporation currently in effect, withoutincluding the certificate information required by subsection (6) ofthis section. [1989 c.l0l0 § 112]


(1) Proposed Changes to the Model Act: Redundant languagehas been deleted. Each reference to "member" has been clarifiedbecause voting rights of members may vary by class. Language hasbeen added to parallel a proposal by the Business Corporation TaskForce to amend the corresponding business corporation statute,ORS 60.451.

(2) Effective Changes from Chapter 61 Provisions: The board ofdirectors may adopt restated articles which do not include newamendments without going to the members or other party entitledto approve amendments. This allows the board to consolidate previously approved amendments in restated articles without the formal approval of the members or other party. The detailedstatements of the voting procedure required by ORS 61.385(3) havebeen deleted. Also, the Secretary of State is authorized to certifyrestated articles without including information on the manner ofadoption.

(3) Relationship to the Oregon Business Corporation Act: ModelAct § 10.06 closely follows ORS 60.451, and the proposal has beenamended to more closely follow ORS 60.451.

(4) Other Comments: This section makes technical improvements without major substantive change.

65.454 AMENDMENT PURSUANT TO COURT ORDER

(1) A corporation's articles may be amended without board approval or approval by the members entitled to vote on articles, orapproval required pursuant to ORS 65.467:

(a) To carry out a plan of reorganization ordered or decreed by acourt of competent jurisdiction under federal statute; or

(b) In a proceeding brought by the Attorney General in the Cir-

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cuit Court for Marion County to correct the statement in the articles of incorporation or the annual report with regard to whetherthe corporation is a public benefit or mutual benefit corporation or,subject to the provisions of ORS 65.042, a religious corporation.

(2) The articles after amendment shall contain only provisionsrequired or permitted by ORS 65.047.

(3) The individual or individuals designated by the court in a reorganization proceeding, or the Attorney General in a proceedingbrought by the Attorney General, shall deliver to the Office of theSecretary of State for filing articles of amendment setting forth:

(a) The name of the corporation;(b) The text of each amendment approved by the court;(c) The date of the court's order or decree approving the articles

of amendment;(d) The title of the proceeding in which the order or decree was

entered; and(e) A statement whether the court had jurisdiction of the pro

ceeding under federal statute or under paragraph (b) of subsection(1) of this section.

(4) This section does not apply after entry of a final decree in thereorganization proceeding even though the court retains jurisdiction of the proceeding for limited purposes unrelated to consummation of the reorganization plan. [1989 c.1010 § 113]


(1) Proposed Changes to the Model Act: At the request of theAttorney General, a provision has been added allowing the Attorney General to bring a court proceeding to challenge the corporation's self-designated character as public benefit, mutual benefit, orreligious. Minor changes were made, including clarification of"members" who have voting rights.

(2) Effective Changes from Chapter 61 Provisions: ORS 61.373is considerably more wordy, without any significant difference ineffect. ORS 61.373(2) consists of examples that are arguably helpfulbut are not really needed by the Bankruptcy Court to spell out itspower. ORS 61.375(3)(b) and (4) describe a procedure and effectivedate that are not recommended for retention because they do notappear to be necessary.

The proposal adds an Attorney General proceeding in paragraph

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(l)(b). The proposal also adds a new provision in subsection (4)which limits the section to the period prior to the entry of a finaldecree in the reorganization proceeding.

(3) Relationship to the Oregon Business Corporation Act: Thissection, except for the Attorney General proceeding, is closely patterned after ORS 60.454.

(4) Other Comments: This provision, under which the Bankruptcy Court will make all the decisions, is seldom used, and theAttorney General proceeding will be used only in unusual cases offraud. The cross-reference in paragraph (l)(b) to ORS 65.042 isintended as a reminder of the constitutional constraints limiting theAttorney General's challenges to a corporation's claim that it isreligious.

65.457 EFFECT OF AMENDMENT AND RESTATEMENT

An amendment to articles of incorporation does not affect acause of action existing against or in favor of the corporation, aproceeding to which the corporation is a party, any requirement orlimitation imposed upon the corporation or any property held by itby virtue of any trust upon which such property is held by the corporation or the existing rights of persons other than members of thecorporation. An amendment changing a corporation's name doesnot abate a proceeding brought by or against the corporation in itsformer name. [1989 c.1010 § 114]


(1) Proposed Changes to the Model Act: None.(2) Effective Changes from Chapter 61 Provisions: No signifi

cant substantive change except for the reference to trusts underwhich the corporation may hold property. ORS 61.380 refers to a"pending action" while the proposal refers to a "proceeding."

(3) Relationship to the Oregon Business Corporation Act: Thesection closely follows ORS 60.457 but also provides that theamendment does not affect any trust under which the corporationmay hold property.

(AMENDMENT OF BYLAWS)

65.461 AMENDMENT BY DIRECTORS

Unless otherwise provided in its articles or bylaws, a corporation

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with no members with the power to vote on bylaws shall amend itsbylaws as provided in this section. The corporation's incorporatorsuntil directors have been chosen, and thereafter its board of direc:tors may adopt one or more amendments to the corporation's bylaws subject to any approval required pursuant to ORS 65.467. Thecorporation shall provide notice of any meeting of directors atwhich an amendment is to be approved. The notice shall be in accordance with ORS 65.344 (2). The notice must also state that thepurpose, or one of the purposes, of the meeting is to consider a proposed amendment to the bylaws and contain or be accompanied by acopy or summary of the amendment or state the general nature ofthe amendment. [1989 c.1010 § 115]


(1) Proposed Changes to the Model Act: One change is deletionof the requirement that bylaws be approved by a majority of theboard then in office rather than by a majority of a quorum. There isalso reference to an alternative method of adoption which may bespecified in the articles or bylaws.

(2) Effective Changes from Chapter 61 Provisions: This sectionis more restrictive than ORS 61.095 because this section requires aspecific time and content of notice for the directors' meeting atwhich bylaws are to be adopted. Under ORS 61.145, however, noparticular advance notice or content of notice is required for directors'meetings. See also Model Act § 8.22(b), as amended in ORS65.344(2).

Note that incorporators may act as directors to amend bylawsuntil the directors are chosen.

Under this section the procedure for amendment of bylaws generally follows the procedure for amendment of articles. See ModelAct § 1O.02(b).

(3) Relationship to the Oregon Business Corporation Act: Thereis no corresponding provision in Chapter 60 because a business corporation always has shareholders following its initial organization.

(4) Other Comments: The more restrictive approach of theModel Act is retained, but an initial amendment has been added tothe section. This allows a corporation without members which prefers Chapter 61 's, or some other approach to bylaw adoption, to opt

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ORS 65.464

out by a provision in its articles or bylaws. See other comments toORS 65.434.

65.464 AMENDMENT BY DIRECTORS AND MEMBERS

(1) A corporation's board of directors may amend or repeal thecorporation's bylaws unless:

(a) The articles of incorporation or this chapter reserve thispower exclusively to the members, or to a party authorized underORS 65.467, or both, in whole or in part; or

(b) The members entitled to vote on bylaws, in amending or repealing a particular bylaw, provide expressly that the board of directors may not amend or repeal that bylaw.

(2) A corporation's members entitled to vote on bylaws, subjectto ORS 65.467, may amend or repeal the corporation's bylaws eventhough the bylaws may also be amended or repealed by its board ofdirectors. [1989 c.1010 § 116]


(1) Proposed Changes to the Model Act: Delete language ofModel Act § 10.21 and replace with language adapted from ORS60.461.

(2) Effective Changes from Chapter 61 Provisions: Chapter 61takes the approach that the board of directors shall have the powerto adopt or amend the bylaws, unless otherwise provided in the articles or the bylaws. There is no specific statutory procedure foradoption or amendment of bylaws. Thus the Model Act presents aconsidered and logical procedure which protects a member's rights,but does so at the expense of the flexibility existing under currentOregon law. The Official Comment to the Model Act states that therationale for the restriction is that basic rights of a member are usually set forth in the corporation's bylaws.

(3) Relationship to the Oregon Business Corporation Act: Chapter 60 follows an approach closer to Chapter 61 than to the ModelAct. ORS 60.461 provides that the board of directors has the powerto amend unless otherwise specified. ORS 6O.461(1)(b) and (2) provide further flexibility by providing for a dual power of amendmentwith a "tiebreaker" provision.

(4) Other Comments: The policy decision is whether the ModelAct's concern that bylaw amendment be regulated to protect mem-

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ORS 65.467

bers is more important than the flexibility and simplicity of ORS61.095. The Business Corporation Act is closer to ORS 61.095. Because member protection can be achieved through the articles orthrough optional provisions in the bylaws which give members avoice in amendment, the detailed regulatory approach of Model Act§ 10.21 has not been chosen. Instead, the approach of the BusinessCorporation Act has been followed, providing a default provisionfor those corporations which do not specify in their articles how thebylaws may be amended.

Note - The proposal omits Model Act § 10.22 (class voting by members on amendments).

65.467 ApPROVAL BY THIRD PERSONS

The articles may require an amendment to the articles or bylawsto be approved in writing by a specified person or persons otherthan the board. Such an article provision may not be amended without the approval in writing of such person or persons. [1989 c.1010§ 117]


(1) Proposed Changes to the Model Act: Minor stylistic change.(2) Effective Changes from Chapter 61 Provisions: There is no

comparable provision in Chapter 61. It could be argued that articles' provisions implementing this section are already permittedunder ORS 61.311(1)(c) as "provisions, not inconsistent with law... for the regulation of the internal affairs of the corporation ...."This section removes any remaining questions of validity and alsomay suggest an additional structural feature which can be employedto advantage.

(3) Relationship to the Oregon Business Corporation Act: Thereis no direct counterpart in Chapter 60, although the result is similarto that which could be reached by employing a preferred class ofstock.

(4) Other Comments: The increased flexibility and the benefitsdescribed in the Official Comment to Model Act § 10.30 justify itsretention.

Note - The proposal omits Model Act optional § 10.31 (amendmentterminating members or redeeming or canceling membership).

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ORS 65.481

MERGER

65.481 ApPROVAL OF PLAN OF MERGER

(1) Subject to the limitations set forth in ORS 65.484, one ormore nonprofit corporations may merge with a business or nonprofit corporation, if the plan of merger is approved as provided inORS 65.487.

(2) The plan of merger must set forth:(a) The name of each business or nonprofit corporation planning

to merge and the name of the surviving corporation into which eachother corporation plans to merge;

(b) The terms and conditions of the merger;(c) The manner and basis, if any, of converting the memberships

of each public benefit or religious corporation into memberships ofthe surviving corporation; and

(d) If the merger involves a mutual benefit or business corporation, the manner and basis, if any, of converting the memberships orshares of each merging corporation into memberships, obligations,shares or other securities of the surviving or any other corporationor into cash or other property in whole or part.

(3) The plan of merger may set forth:(a) Amendments to the articles of incorporation of the surviving

corporation; and(b) Other provisions relating to the merger. [1989 c.1010 § 118]


(1) Proposed Changes to the Model Act: The Model Act hasbeen modified to reflect the language of the Business CorporationAct where appropriate. Reference to "business corporations" hasbeen inserted in appropriate places because the definition of "corporation" in ORS 65.001(8), Model Act § 1.40, refers only to nonprofit corporations.

(2) Effective Changesfrom Chapter 61 Provisions: The proposalpermits a nonprofit corporation to merge with either another nonprofit corporation or with a business corporation if certain conditions are met. See ORS 65.484, Model Act § 11.02. Mergers withforeign corporations are addressed in a separate section. See ORS65.497, Model Act § 11.06. In addition to the items specified inORS 61.455 to be covered in the plan of merger, the Model Act also

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ORS 65.484

requires the manner and basis of converting memberships in themerging corporations to be set forth. Abandonment of a plannedmerger is addressed in ORS 65.487(7), Model Act § 11.03(g). Thecommentary to the Model Act explains that no provision has beenincluded for consolidations because mergers are usually preferableand because the same result can be achieved by incorporating a newcorporation which will be the surviving corporation in the merger.Accordingly, the proposal does not include a consolidation provision comparable to ORS 61.461.

(3) Relationship to the Oregon Business Corporation Act: Section 11.01 basically parallels ORS 60.481, with the addition of adistinction between public benefit and religious corporations andmutual benefit corporations with respect to conversion ofmemberships.

(4) Other Comments: The merger of a nonprofit corporationwith a business corporation is authorized in the corporation statutesof several other states, including California and Delaware.

65.484 LIMITATIONS ON MERGERS BY PUBLIC BENEFIT ORRELIGIOUS CORPORATIONS

(1) Without the prior written consent of the Attorney General orthe prior approval of the circuit court of the county where the corporation's principal office is located or, if the principal office is notin this state, where the registered office of the corporation is or waslast located, in a proceeding in which the Attorney General hasbeen given written notice, a public benefit or religious corporationmay merge only with:

(a) A public benefit or religious corporation;(b) A foreign corporation which would qualify under this chapter

as a public benefit or religious corporation;(c) A wholly owned foreign or domestic business or mutual bene

fit corporation, provided the public benefit or religious corporationis the surviving corporation and continues to be a public benefit orreligious corporation after the merger; or

(d) A foreign or domestic business or mutual benefit corporation,provided that:

(A) On or prior to the effective date of the merger, assets with avalue equal to the gr~ater of the fair market value of the net tangible and intangible assets, including good will, of the public benefit

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ORS 65.484

or religious corporation or the fair market value of the public benefit or religious corporation if it were to be operated as a businessconcern are transferred or conveyed to one or more persons whowould have received its assets under ORS 65.637 (1)(e) and (0 hadit dissolved;

(B) It shall return, transfer or convey any assets held by it uponcondition requiring return, transfer or conveyance, which conditionoccurs by reason of the merger, in accordance with such condition;and

(C) The merger is approved by a majority of directors of the public benefit or religious corporation who are not and will not becomemembers or shareholders in, or officers, employees, agents or consultants of, the surviving corporation.

(2) Notice, including a copy of the proposed plan of merger, mustbe delivered to the Attorney General at least 20 days before consummation of any merger of a public benefit corporation or a religious corporation pursuant to paragraph (d) of subsection (1) of thissection.

(3) Without the prior written consent of the Attorney General orthe prior approval of the court specified in subsection (1) of thissection in a proceeding in which the Attorney General has beengiven written notice, no member of a public benefit or religious corporation may receive or keep anything as a result of a merger otherthan a membership in the surviving public benefit or religious corporation. Where approval or consent is required by this section, itshall be given if the transaction is consistent with the purposes ofthe public benefit or religious corporation or is otherwise in thepublic interest. [1989 c.l0l0 § 119]


(1) Proposed Changes to the Model Act: Subsection (1) has beenrevised to add flexibility by authorizing the Attorney General toconsent to the merger of a public benefit or religious corporationwith a mutual benefit or business corporation where the statutoryexceptions are not available as an alternative to instituting a courtproceeding. This change is parallel to the alternatives specified insubsection (3). The other modifications are in the nature of clericalor grammatical corrections or conforming changes to enhance internal consistency.

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ORS 65.487

(2) Effective Changes from Chapter 61 Provisions: There is nocomparable provision, as ORS 61.455 to 61.481 does not authorizethe merger of a nonprofit corporation with a business corporation,and ORS chapter 61 does not distinguish among mutual benefit,public benefit, and religious corporations.


(4) Other Comments: Pursuant to subsection (l)(d)(C), themerger of a public benefit or religious corporation with a business ormutual benefit corporation imposes a special requirement of approval by disinterested directors in addition to the board approvalrequired by ORS 65.487, Model Act § 11.03. The concept of limitations on the merger of a public benefit or religious corporation witha mutual benefit or business corporation derives from CaliforniaNonprofit Corporation Law §§ 6010 (public benefit), 8010 (mutualbenefit), and 9640 (religious). The common law governing charitable gifts and trusts imposes comparable constraints. See also theCharitable Trust and Corporation Act, ORS 128.610 through128.750.

65.487 ACTION ON PLAN BY BOARD, MEMBERS AND THIRDPERSONS

(1) Unless this chapter, the articles, bylaws or the board of directors or members, acting pursuant to subsection (3) of this section,require a greater vote or voting by class, adoption of a plan ofmerger requires, with respect to each corporation party to themerger, approval:

(a) By the board;

(b) By the members entitled to vote on the merger, if any, by atleast two-thirds of the votes cast or a majority of the voting power,whichever is less; and

(c) In writing, by any person or persons whose approval is required for an amendment to the articles or bylaws by a provision ofthe articles, as authorized by ORS 65.467.

(2) If the corporation does not have members entitled to vote onthe merger, the merger must be approved by a majority of the directors in office at the time the merger is approved. In addition, thecorporation shall provide notice of any directors' meeting at whichsuch approval is to be obtained in accordance with ORS 65.344 (2).

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The notice must also state that the purpose, or one of the purposes,of the meeting is to consider the proposed merger.

(3) The board of directors may condition its submission of theproposed merger to a vote of members, and the members entitled tovote on the merger may condition their approval of the merger, onreceipt of a higher percentage of affirmative votes or on any otherbasis.

(4) If the board seeks to have the plan approved by the membersat a membership meeting, the corporation shall give notice to itsmembers of the proposed membership meeting in accordance withORS 65.214. The notice must also state that the purpose, or one ofthe purposes, of the meeting is to consider the plan of merger andcontain or be accompanied by a copy or summary of the plan. Thecopy or summary of the plan for members of the surviving corporation shall include any provision that, if contained in a proposedamendment to the articles of incorporation or bylaws, would entitlemembers to vote on the provision. The copy or summary of the planfor members of each disappearing corporation shall include a copyor summary of the articles and bylaws which will be in effect immediately after the merger takes effect.

(5) If the board seeks to have the plan approved by the membersby written consent or written ballot, the material soliciting the approval shall contain or be accompanied by a copy or summary ofthe plan. The copy or summary of the plan for members of the surviving corporation shall include any provision that, if contained in aproposed amendment to the articles of incorporation or bylaws,would entitle members to vote on the provision. The copy or summary of the plan for members of each disappearing corporationshall include a copy or summary of the articles and bylaws whichwill be in effect immediately after the merger takes effect.

(6) Voting by a class of members is required on a plan of mergerif the plan contains a provision that, if contained in a proposedamendment to the articles of incorporation, would entitle the classof members to vote as a class on the proposed amendment underORS 65.441. The plan is approved by a class of members by twothirds of the votes cast by the class or a majority of the votingpower of the class, whichever is less.

(7) After a merger is adopted, and at any time before articles ofmerger are filed, the planned merger may be abandoned, subject to

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any contractual rights, without further action by members or otherpersons who approved the plan, in accordance with the procedureset forth in the plan of merger or, if none is set forth, in the mannerdetermined by the board of directors. [1989 c.l0l0 § 120]


(1) Proposed Changes to the Model Act: Certain changes havebeen made in the Model Act to conform to the provisions of ORS60.487 and to certain changes made in ORS 65.437 as comparedwith Model Act § 10.03. Because the voting rights of members mayvary by class, a specific reference to the type of voting power involved has been added.

(2) Effective Changes from Chapter 61 Provisions: As discussedunder the commentary to ORS 65.481, provisions for plans of consolidation have not been included in the Model Act, and mergerswith foreign corporations are addressed in a separate section. Theproposal effectively reduces the approval requirement by membersto only a majority of the total votes entitled to be cast where morethan 75 percent of such votes are present or represented. See commentary to ORS 65.437. This proposal gives the board of directorsthe power to determine to abandon the proposed merger withoutaction by the members or other persons who approved the plan ofmerger if no procedure is set forth in the plan.

(3) Relationship to the Oregon Business Corporation Act: Theproposal corresponds to ORS 60.487, although the two diverge substantially due to differences in shareholder and member-related issues. The proposal requires approval by the members of eachcorporation which has members with the power to vote on mergers;the exception to shareholder approval included in ORS 60.487 isappropriate only in the business corporation context.

65.491 ARTICLES OF MERGER

(1) After a plan of merger is approved by the board of directorsof each merging corporation and, if required by ORS 65.487, by themembers and any other persons, the surviving corporation shall deliver to the Office of the Secretary of State for filing articles ofmerger setting forth:

(a) The plan of merger.(b) If approval of members was not required, a statement to that

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effect and a statement that the plan was approved by a sufficientvote of the board of directors of each corporation.

(c) If approval by the members of one or more corporations was

required:(A) The designation and number of members of, and number of

votes entitled to be cast by, each class entitled to vote separately on

the plan; and(B) The total number of votes cast for and against the plan by

each class entitled to vote separately on the plan.(d) If approval of the plan by some person or persons other than

the members or the board is required pursuant to ORS 65.487(l)(c), a statement that the approval was obtained.

(2) Unless a delayed effective date is specified, a merger takeseffect when the articles of merger are filed. [1989 c.l0l0 § 121]


(1) Proposed Changes to the Model Act: Certain changes havebeen made in the Model Act to conform to the provisions of ORS60.494 and to certain changes made in ORS 65.494 as comparedwith Model Act § 11.05. Also, approval by members refers ~~ly tomembers entitled to vote on a merger. The concept of acqumng acorporation is appropriate only to a share exchange in the business

corporation context.(2) Effective Changes from Chapter 61 P~o~isions: As discussed

under the commentary to ORS 65.481, prOVISIOns for plans of consolidation have not been induded in the Model Act and mergerswith foreign corporations are addressed in a separate section. Theitems required to be set forth in the articles of merger by. the ModelAct differ from those specified in ORS 61.471 as appropnate to conform to the differences in approval requirements between ORS65.487 (Model Act § 11.03) and ORS 61.465.

(3) Relationship to the Oregon Busines~ Corpor~tion 1ct : Theproposal generally parallels ORS 60.494: WIth certam vanances relating to the differences in approval reqUIrements. Se~ ORS .65.~04,which provides that any domestic business corporatlo~ whIch IS ~party to a merger pursuant to this .Act shall com~ly WIth all. appltcable provisions of the Oregon Busmess CorporatIOn Act whIch are

not inconsistent with this Act.

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65.494 EFFECT OF MERGER

When a merger takes effect:(1) Every other corporation party to the merger merges into the

surviving corporation and the separate existence of every corporation except the surviving corporation ceases;

(2) The title to all real estate and other property owned by eachcorporation party to the merger is vested in the surviving corporation without reversion or impairment subject to any and all conditions to which the property was subject prior to the merger;

(3) The surviving corporation has all liabilities and obligations ofeach corporation party to the merger;

(4) A proceeding pending against any corporation party to themerger may be continued as if the merger did not occur or the surviving corporation may be substituted in the proceeding for the corporation whose existence ceased;

(5) The articles of incorporation and bylaws of the surviving corporation are amended to the extent provided in the plan of merger;and

(6) The memberships or shares of each nonprofit or business corporation party to the merger that are to be converted into memberships, obligations, shares or other securities of the surviving or anyother corporation or into cash or other property are converted andthe former holders of the memberships or shares are entitled only tothe rights provided in the articles of merger. [1989 c.1010 § 122]


(1) Proposed Changes to the Model Act: Subsection (6), whichparallels ORS 60.497(1)(f), has been added. See ORS 65.48l(2)(c)and (d), Model Act 11.0l(b)(3) and (4).

(2) Effective Changes from Chapter 61 Provisions: As discussedunder the commentary to ORS 65.481, provisions for plans of consolidation have not been included in the Model Act and mergerswith foreign corporations are addressed in a separate section. Theproposal specifically notes that any conditions to which property ofany of the merging corporations was subject shall continue in effect.Although the language of ORS 61.481 is considerably longer andmore detailed than that of the proposal, the substance of the twoprovisions is otherwise the same in all material respects.

(3) Relationship to the O~egon Business Corporation Act: The

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proposal parallels ORS 60.497, with the exception that the subsection relating to the exchange of shares, which applies only in thebusiness corporation context, has been omitted.

65.497 MERGER WITH FOREIGN CORPORATION

(1) Except as provided in ORS 65.484, one or more foreign business or nonprofit corporations may merge with one or more domestic nonprofit corporations if:

(a) The merger is permitted by the law of the state or countryunder whose law each foreign business or nonprofit corporation isincorporated and each foreign business or nonprofit corporationcomplies with that law in effecting the merger;

(b) The foreign business or nonprofit corporation complies withORS 65.491 if it is the surviving corporation of the merger; and

(c) Each domestic nonprofit corporation complies with the applicable provisions of ORS 65.481 to 65.487 and, if it is the survivingcorporation of the merger, with ORS 65.491.

(2) Upon the merger taking effect, a surviving foreign business ornonprofit corporation is deemed to have irrevocably appointed theSecretary of State as its agent for service of process in any proceeding brought against it. [1989 c.1010 § 123]



makes it clear that a merging corporation may be incorporated inanother country as well as another state. The designation of theSecretary of State as agent for service of process by a foreign surviving corporation is somewhat broader under the proposal. The proposal does not include a cross-reference to the pro:isions re1ati~g tothe transaction of business in this state by forelgn corporatlOns.The proposal does not expressly address the issue of the effect of amerger involving a foreign surviving corporation.

(3) Relationship to the Oregon Business Corporation Act: Theproposal generally parallels ORS 60:501 but does n~t include ~rovisions contained in ORS 60.501 whlch are appropnate only m thebusiness corporation context, such as provisions dealing with shareexchanges and dissenters' rights.

151

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ORS 65.501

65.501 EFFECT OF MERGER ON BEQUESTS, DEVISES AND GIFTS

An~ bequest, devise, gift, grant or promise contained in a will orother IDstrument of donation, subscription or conveyance which imade to a constituent cor~oration and which takes effect o~ remain:payable after the ~erger, lDures to the surviving corporation unlessthe will or other IDstrument otherwise specifically provides [1989c.l010 § 124] •


(1) Proposed Changes to the Model Act: None.

(2) Effectiv~ Changes from Chapter 61 Provisions: Chapter 61does not contam a specific provision on the effect of a merger 0

bequests, devises, and gifts. n

(3) Relationship to the Oregon Business Corporation Act· Nocomparable provision. ' .

(4) Other Comments: This provision derives from CalifomiNonprofit Corporation Law §§ 6022 and 8022. a

65.504 MERGER WITH BUSINESS CORPORATION

.Any domestic business corporation which is a party to a mergerw~th a nonpr?fit corporation pursuant to this chapter shall comply~Ith all applicable requirements of the Oregon Business Corporation Act relating to mergers except when inconsistent with thischapter. ~f a domestic business corporation is the survivor of amerge~ with a nonprofit corporation, following the merger it shall:el~~~Ject to the Oregon Business Corporation Act. [1989 c.1010

OFFICIAL COMMENT TO ORS 65.504 (MODEL ACT § (NONE»

(1) P~oposed Changes to the Model Act: The Model Act doesnot contam a comparable provision.

(2) E.ffectiv~ Changes from Chapter 61 Provisions: Chapter 61does not contam a comparable provision.

(3) Relations~iJ: to the Oregon Business Corporation Act: Nocomparable provIsion.

. (4) .Other Comments: ORS 65.504 would clarify that a domestic .busmess corporation proposing to merge with a nonprofit corporation must obtain shareholder approval and meet any other

152

ORS 65.531

appropriate requirements of Chapter 60. It would also clarify that asurviving corporation which was a domestic business corporationwill be subject to the Oregon Business Corporation Act. ORS60.481 has been amended to cross-reference the chapter on mergersin this Act for mergers between domestic business corporations andnonprofit corporations.

SALE OF ASSETS

65.531 SALE OF ASSETS IN REGULAR COURSE OF ACTIVITIES;MORTGAGE OF ASSETS

(1) A corporation may, on the terms and conditions and for theconsideration determined by the board of directors:

(a) Sell, lease, exchange or otherwise dispose of all or substantially all of its property in the usual and regular course of its activities; or

(b) Mortgage, pledge, dedicate to the repayment of indebtedness,whether with or without recourse, or otherwise encumber any or allof its property whether or not in the usual and regular course of itsactivities.

(2) Unless required by the articles of incorporation, approval bythe members or any other person of a transaction described in subsection (1) of this section is not required. [1989 c.l0l0 § 126]


(1) Proposed Changes to the Model Act: Certain changes havebeen made to conform to the language of the Business CorporationAct where appropriate.

(2) Effective Changes from Chapter 61 Provisions: ORS 61.505requires procedures comparable to those specified in ORS 65.534,Model Act § 12.02, for all sales or other dispositions of all or substantially all the assets of a nonprofit corporation, without exceptions for dispositions in the ordinary course of its activities and formortgages or other encumbrances of any or all of its property. Theproposal will thus expand the authority of the board of directors ofa nonprofit corporation, under rare circumstances with respect tosales, but with unlimited discretion (subject to fiduciary obligationsunder ORS 65.537 and 65.361, Model Act §§ 8.30 and 8.31) withrespect to mortgages. If the members of a nonprofit corporationwished to limit the directors' authority to mortgage all or substan-

153

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ORS 65.534

tially all of its assets, the articles of incorporation could be preparedor amended to include a requirement of approval by members comparable to that specified in ORS 61.505. In the absence of such aprovision in the articles, the proposal would permit nonprofit cor~orations to enter into secured financing transactions substantiallym the same manner as business corporations.

(3) Relationship to the Oregon Business Corporation Act: Thissection parallels ORS 60.531.

65.534 SALE OF ASSETS OTHER THAN IN REGULAR COURSE OF

ACTIVITIES

(1) A corporation may sell, lease, exchange or otherwise disposeof all or substantially all of its property, with or without the goodwill, other than in the usual and regular course of its activities, onthe terms and conditions and for the consideration determined bythe corporation's board of directors if the proposed transaction isauthorized by subsection (2) of this section.

(2) Unless this chapter, the articles, bylaws or the board of directors or members, acting pursuant to subsection (4) of this section. 'requIre a greater vote or voting by class, the proposed transactionto be authorized must be approved:

(a) By the board;(b) By the members entitled to vote on the transaction by at least

two-thirds of the votes cast or a majority of the voting power,whichever is less; and

(c) In writing by any person or persons whose approval is required for an amendment to the articles or bylaws by a provision ofthe articles as authorized by ORS 65.467.

(3) If the corporation does not have members entitled to vote onthe transaction, it must be approved by a majority of the directorsin office at the time the transaction is approved. In addition, thecorporation shall provide notice of any directors' meeting at whichsuch approval is to be obtained in accordance with ORS 65.344 (2).The notice must also state that the purpose, or one of the purposes,of the meeting is to consider the sale, lease, exchange or other disposition of all or substantially all of the property of the corporationand contain or be accompanied by a description of the transaction.

(4) The board of directors may condition its submission of theproposed transaction to a vote of members, and the members enti-

154

ORS 65.534

tIed to vote on the transaction may condition their approval of thetransaction, on receipt of a higher percentage of affirmative votes or

on any other basis.(5) If the board seeks to have the transaction approved by the

members at a membership meeting, the corporation shall give noticeto its members of the proposed membership meeting in accordancewith ORS 65.214. The notice must also state that the purpose, orone of the purposes, of the meeting is to consider the sale, lease,exchange or other disposition of all or sUbstantiall~ all of the pr~perty of the corporation and contain or be accompanied by a descrip-

tion of the transaction.(6) If the board seeks to have the transaction approv~d by. t?e

members by written consent or written ballot, the materul~ s~hcIting the approval shall contain or be accompanied by a description of

the transaction.(7) A public benefit or religious corporation must give written

notice to the Attorney General 20 days before it sells, leases, exchanges or otherwise disposes of all or substantially all of its pr~perty unless the transaction is in the usual and regular co~rse of ~tsactivities or the Attorney General has given the corporation a Writ-ten waiver of this notice requirement.

(8) After a sale, lease, exchange or other disposition of propertyis authorized, the transaction may be abandoned, subject to anycontractual rights, without further action by the members ~r anyother person who approved the transaction, in accordance ~Ith th.eprocedure set forth in the resolution proposing the transaction ~r, Ifnone is set forth, in the manner determined by the board of dIrec-

tors. [1989 c.1010 § 127]


(1) Proposed Changes to the Model Act: The ~ode1 Act hasbeen changed to more closely follow the parallel Busmess Corporation Act provision, ORS 60.534, and the comparabl.e approval requirements specified in ORS 65.487 as compared With Model A~t§ 11.03 for mergers. See commentary. to ORS 65.487. Certamother changes of a clerical or grammatical nature have also been

made.(2) Effective Changes from Chapter 61 Provisions: The Model

Act effectively reduces the approval requirement by members to

155

ORS 65.551

only a majority of the total votes entitled to be cast where morethan 75 percent of such votes are present. The Model Act contemplates that the terms of the transaction will be fixed by the board ofdirectors prior to submission to the members for approval (whererequired).

(3) Relationship to the Oregon Business Corporation Act: Theproposal corresponds to ORS 60.534, although the two diverge dueto differences in the types of corporations involved.

DISTRIBUTIONS

65.551 PROHIBITED DISTRIBUTIONS

Except as authorized by ORS 65.554, a corporation shall notmake any distributions. [1989 c.1010 § 128]


(1) Proposed Changes to the Model Act: None.(2) Effective Changes from Chapter 61 Provisions: Chapter 61

permits all nonprofit corporations to distribute assets to memberson dissolution or liquidation. This section, in conjunction withORS 65.554, Model Act § 13.02, will restrict permitted distributions for public benefit and religious corporations to a greater extentthan ORS Chapter 61. The Model Act wording is consistent withthe definition of "nonprofit corporation" in ORS 61.011(8).

(3) Relationship to the Business Corporation Act: Distributionsare authorized by ORS 60.181. The provisions are unrelated, due tothe entirely different meaning of "distribution."

65.554 AUTHORIZED DISTRIBUTIONS

Unless prohibited by its articles or bylaws:(1) A mutual benefit corporation may purchase its memberships

and, under the circumstances indicated in ORS 65.147 and 65.171,a public benefit or religious corporation may purchase its memberships, if after the purchase is completed:

(a) The corporation would be able to pay its debts as they become due in the usual course of its activities; and

(b) The corporation's total assets would at least equal the sum ofits total liabilities.

156

IIb _

ORS 65.621

(2) A corporation may make distributions upon dissolution inconformity with ORS 65.621 to 65.674.

(3) A corporation may make distributions to a member which is areligious or public benefit corporation or a foreign non~rofit cor~

ration which, if incorporated in this state, would qualIfy as a rehgious or public benefit corporation. [1989 c.1010 § 129]


(1) Proposed Changes to the Model Act: Mutual benefit .corporations are generally authorized to purchase the membership of amember pursuant to ORS 65.171(2), Model Act § 6.22(b). However, many mutual benefit corporations, such as those exempt fr?mfederal income taxation pursuant to Internal Revenue Code sectIOn50l(c)(4), will have adopted "noninurement" pro~isions in ~rticles

or bylaws. The added introductory ,:ording re,~atln~ to artlcl~~ orbylaws is intended to assure the effectiveness of nonmurement restraints in organizational documents.

ORS 65.147 and 65.171 depart from Model Act §§ 6.11 and 6.22in permitting public benefit and religious corporations to purchasemembership rights from a member which is also a public benefit orreligious corporation. The modifications here are intended to conform to those changes.

(2) Effective Changes from Chapter 61 Provisions: SUbsecti.on(1) is a new provision. Subsection (2) represents no substantivechange from ORS 61.165.

(3) Relationship to the Oregon Business Corporation Act: Thisprovision is based in part on ORS 60.181.

DISSOLUTION

(VOLUNTARY DISSOLUTION)

65.621 DISSOLUTION BY INCORPORATORS

(1) A majority of the incorporators of a corporation that~ nomembers and that does not yet have initial directors may, subject toany approval required by the articles or bylaws, dissolve the corporation by delivering articles of dissolution to the Office of the Sec-retary of State for filing. .

(2) The corporation shall give the incorporators ?ot!ceequivalent to that specified in ORS 65.344 (2), of any meetmg at

157

ORS 65.621

which dissolution will be considered. The notice must also state thatthe purpose, or one of the purposes, of the meeting is to considerdissolution of the corporation.

(3) The incorporators in approving dissolution shall adopt a planof dissolution indicating to whom the assets owned or held by thecorporation will be distributed after all creditors have been paid.[1989 c.1010 § 130]


(1) Proposed Changes to the Model Act: As it appears in theModel Act, portions of § 14.01(a) (corresponding to subsection (1)of the proposal) appear to conflict with § 14.02(b) (subsection (2) ofthe proposal) with regard to corporations which have no members.The proposed modifications are intended to permit expedited dissolution in circumstances where the corporation has not yet completed organization of its affairs. Expedited dissolution is permittedfor all corporations that have not yet selected initial directors. Acorporation without members may thereafter be dissolved by its directors with the greater procedural safeguards required by ORS65.624(2), Model Act § 14.02(b), and a corporation with memberspursuant to ORS 65.624(1), Model Act § 14.02(a). Those provisions of ORS 65.624, Model Act § 14.02, appeared to duplicate theprovisions in Model Act § 14.01 with respect to dissolution by initial directors.

The title of this section has been changed because the Model Actcontains no reference to approval by third persons and the revisionsof the Task Force deleted references to dissolution by initialdirectors.

(2) Effective Changes from Chapter 61 Provisions: Thesechanges authorize the incorporators to dissolve the corporation andadd specific requirements for the content of a notice for a meetingwhere dissolution will be considered.

(3) Relationship to the Oregon Business Corporation Act: Thissection generally follows ORS 60.621, which permits expedited dissolution for business corporations which have not issued shares orcommenced business.

158

ORS 65.624

65.624 DISSOLUTION BY DIRECTORS, MEMBERS AND THIRD

PERSONS

(1) Unless this chapter, the articles, bylews or the boar~ of di~ectors or members, acting pursuant to subsection (3) ?f thIS s~ctIo~,require a greater vote or voting by class, dissolution IS authorIzed If

it is approved:(a) By the board;(b) By the members entitled to vote on dissolution, if any, by at

least two-thirds of the votes cast or a majority of the voting power,

whichever is less; and(c) In writing, by any person or persons whose approv~ is re

quired for an amendment of the articles or bylaws, as authorIzed byORS 65.467, or for dissolution.

(2) If the corporation does not have members entitled to vote ondissolution dissolution must be approved by a vote of a majority ofthe direct~rs in office at the time the transaction is app~oved. Inaddition, the corporation shall provide notice of any meetI~g of t~eboard of directors at which such approval is to be consIdered maccordance with ORS 65.344 (2). The notice must also state thatthe purpose, or one of the purposes, of the meeting is to ~onsiderdissolution of the corporation and contain or be accompanIed by acopy or summary of the plan of dissolution. .

(3) The board may condition its submission of the proposed dissolution to a vote of members, and the members may condition theirapproval of the dissolution on receipt of a higher percentage of af

firmative votes or on any other basis.(4) If the board seeks to have dissolution approved by the mem

bers at a membership meeting, the corporation shall give all members, whether or not entitled to vote, notice of the propo~edmembership meeting in accordance with ORS 65.214. The noticemust also state that the purpose, or one of the purposes, of themeeting is to consider dissolving the corporation and contain or beaccompanied by a copy or summary of the plan of dissolution.

(5) If the board seeks to have dissolution approv.ed by .t~~ members by written consent or written ballot, the materIal sobcItmg theapproval shall contain or be accompanied by a copy or summary of

the plan of dissolution.(6) The plan of dissolution shall indicate to whom the assets

159

r

ORS 65.627

owned or held by the corporation will be distributed after all creditors have been paid. [1989 c.1010 § 131; 1991 c.231 § 11]


. (1) Pr~posed Changes to the Model Act: The proposed change10 subsectIon (1)(c) is intended to clarify difficult wording in theModel Act. The intent remains unchanged: if the articles or bylawsrequire some person other than the directors or members to approvean amendment, then that person must also approve dissolution.

The change in subsection (4) is stylistic.(2) Effective Changes from Chapter 61 Provisions: This section

generally follows ORS 61.525. Subsection (3), which permits conditions to be placed on dissolution, has no express counterpart inChapter 61.


(4) Other Comments: Either the board of directors or the members may, by the vote of a simple majority, require a supermajorityfor approval of dissolution. Thus a narrow majority of the directorscan thwart the desire of a substantial majority of members. TheTask Force felt this provision was appropriate for the protection ofthe minority. However, there is no similar provision in ORS Chapter 61. By way of comparison, ORS 60.627(3) provides: "The boardof directors may condition its submission of the proposal for dissolution on any basis."

65.627 NOTICES TO ATTORNEY GENERAL

(1) A public benefit or religious corporation shall give the Attorney General written notice that it intends to dissolve at or beforethe time it delivers articles of dissolution to the Secretary of State.The notice shall include a copy or summary of the plan ofdissolution.

(2) No assets shall be transferred or conveyed by a public benefitor religious corporation as part of the dissolution process until 20days after it has given the written notice required by subsection (1)

of this section to the Attorney General or until the Attorney General has consented in writing, or indicated in writing, that the At·torney General will take no action in respect to the transfer orconveyance, whichever is earlier.

160

ORS 65.631

(3) When all or substantially all of the assets of a public benefitcorporation have been transferred or conveyed following approvalof dissolution, the board shall deliver to the Attorney General a listshowing those, other than creditors, to whom the assets were transferred or conveyed. The list shall indicate the addresses of eachperson, other than creditors, who received assets and indicate whatassets each received. [1989 c.1010 § 132]


(1) Proposed Changes to the Model Act: None.(2) Effective Changes from Chapter 61 Provisions: The require

ment of a report to the Attorney General on a voluntary dissolution

is new.(3) Relationship to the Oregon Business Corporation Act: The

Business Corporation Act contains no comparable provision.(4) Other Comments: Under ORS 128.630 and common law,

the Attorney General has general authority for supervision of charitable corporations. Notification to the Attorney General is the onlymeans to alert the appropriate supervising agency of the pendingdissolution and should assist the Attorney General in the supervisory function.

65.631 ARTICLES OF DISSOLUTION

(1) At any time after dissolution is authorized, the corporationmay dissolve by delivering to the Office of the Secretary of Statefor filing, articles of dissolution setting forth:

(a) The name of the corporation;(b) The date dissolution was authorized;(c) A statement that dissolution was approved by a sufficient vote

of the board;(d) If approval of members was not required, a statement to that

effect and a statement that dissolution was approved by a sufficientvote of the board of directors or incorporators;

(e) If approval by members entitled to vote was required:(A) The designation and number of members of, and number of

votes entitled to be cast by, each class entitled to vote separately ondissolution; and

(B) The total number of votes cast for and against dissolution byeach class entitled to vote separately on dissolution;

161

ORS 65.634

(t) If approval of dissolution by some person or persons otherthan the members entitled to vote on dissolution, the board or theincorporators is required pursuant to ORS 65.624 (1)(c), a statement that the approval was obtained; and

(g) If the corporation is a public benefit or religious corporation,that the notice to the Attorney General required by ORS 65.627 (1)has been given.

(2) A corporation is dissolved upon the effective date of its articles of dissolution. [1989 c.l0l0 § 133]


(1) Proposed Changes to the Model Act: The changes in Subsection (1)(e)(A) are generally intended to conform this section to ORS65.447 and 65.491 as compared with Model Act §§ 10.05 and 11.04.Deletion of "indisputably" is based on the Task Force's belief that acorporate officer will certify to the Secretary of State the authenticity of information reported in the articles of dissolution. Presumably the corporate officer will not certify votes he or she believes tobe "disputable" so nothing is gained by requiring separate reportingof votes which are "indisputable." Deletion of the reference to "undisputed" votes in subsection (1)(e)(B) was based on the samereasoning.

(2) Effective Changes from Chapter 61 Provisions: The ModelAct is intended to give a corporation flexibility to file its articles ofdissolution either at the time dissolution is authorized or after it haswound up its affairs and disposed of its assets, or anytime in between. Under existing Oregon law (ORS 61.545) a nonprofit corporation may not file articles of dissolution until it has completelywound up its affairs and disposed of its property. For a businesscorporation, however, current Oregon law (ORS 60.631) grants thesame flexibility provided by the Model Act. The Model Act is chosen over existing law in the interests of consistency with Chapter 60.

(3) Relationship to the Oregon Business Corporation Act: Thissection generally follows ORS 60.631.

65.634 REVOCATION OF DISSOLUTION

(1) A corporation may revoke its dissolution within 120 days ofits effective date.

(2) Revocation of dissolution must be authorized in the same

162

ORS 65.634

manner as the dissolution was authorized unless that authorizationof dissolution permits revocation by action of the board of directorsalone. If the authorization of dissolution permits revocation by action of the board of directors alone, the board of directors may revoke the dissolution without action by the members or any otherperson.

(3) After the revocation of dissolution is authorized, the corporation may revoke the dissolution by delivering to the Office of Secretary of State for filing, articles of revocation of dissolution that setforth:

(a) The name of the corporation;(b) The effective date of the dissolution that was revoked;(c) The date that the revocation of dissolution was authorized;(d) If the corporation's board of directors or incorporators re-

voked the dissolution, a statement to that effect;(e) If the corporation's board of directors revoked a dissolution

authorized by the members alone or in conjunction with anotherperson or persons, a statement that revocation was permitted byaction by the board of directors alone pursuant to that authorization; and

(t) If member or third-person action was required to revoke thedissolution, the information required by ORS 65.631 (1)(e) and (t).

(4) Unless a delayed effective date is specified, revocation of dissolution is effective when articles of revocation of dissolution arefiled.

(5) When the revocation of dissolution is effective, it relates backto and takes effect as of the effective date of the dissolution and thecorporation resumes carrying on its activities as if dissolution hadnever occurred. [1989 c.l0l0 § 134]


(1) Proposed Changes to the Model Act: The changes in subsection (2) are stylistic and follow ORS 60.634. The change in subsection (4), permitting revocation with a delayed effective date, issubstantive but also follows ORS 60.634. It is accepted for reasonsof consistency.

(2) Effective Changes from Chapter 61 Provisions: Under existing Oregon law (ORS 61.540) the dissolution of a nonprofit corporation may be revoked before but not after the articles of

163

ORS 65.637

dissolution have been issued. For business corporations, Oregon

law (o:~~.S 60.634) follows the Model Act approach of permitting

revocation up to 120 days after the effective date of dissolution. The

MOdel Act is adopted here for consistency with the Business Corporation Act.

(~) Relationship to the Oregon Business Corporation Act: This

sectlOn generally follows ORS 60.634.

65.637 EFFECT OF DISSOLUTION

(1) A dissolved corporation continues its corporate existence but

may not carryon any activities except those appropriate to wind up

and liquidate its affairs, including:

(a) Preserving and protecting its assets and minimizing itsliabilities;

(b) Discharging or making provision for discharging its liabilitiesand obligations;

(c) Disposing of its properties that will not be distributed inkind;

(d) Returning, transferring or conveying assets held by the cor

poration upon a condition requiring return, transfer or conveyance

which condition occurs by reason of the dissolution, in accordanc;

with such condition;

(e) Transferring, subject to any contractual or legal require

ments, its assets as provided in or authorized by its articles of in

corporation or bylaws;

(f) If the corporation is a public benefit or religious corporation

and no provision has been made in its articles or bylaws for distri~

bution of assets on dissolution, transferring, subject to any contrac

tual or legal requirement, its assets to one or more persons

described in ORS 65.001 (31)(b);

(g) If the corporation is a mutual benefit corporation and no pro

vision has been made in its articles or bylaws for distribution of

assets on dissolution, transferring, subject to any contractual or

legal requirements, its assets to its members or, if it has no mem

bers, to those persons whom the corporation holds itself out as ben

efiting or serving; and

(h) Doing every other act necessary to liquidate its assets and

wind up its affairs.

(2) Dissolution of a corporation does not:

164

ORS 65.641

(a) Transfer title to the corporation's property;

(b) Subject its directors or officers to standards of conduct dif

ferent from those prescribed in ORS 65.301 to 65.414;

(c) Change quorum or voting requirements for its board or mem

bers, change provisions for selection, resignation or removal of its

directors or officers, or both, or change provisions for amending its

bylaws;(d) Prevent commencement of a proceeding by or against the

corporation in its corporate name;

(e) Abate or suspend a proceeding pending by or against the cor

poration on the effective date of dissolution; or

(f) Terminate the authority of the registered agent of the corpo

ration. [1989 c.l0l0 § 135]


(1) Proposed Changes to the Model Act: In subsection (1)(f),

references to § 501(c)(3) of the Internal Revenue Code are replaced

with a cross-reference to the required dissolution clause in the pro

posed Act's definition of public benefit corporation. The drafters of

the Model Act have generally substituted the word "activities"

where the word "business" appears in the Model Business Corpora

tion Act. In subsection (a)(8), corresponding to subsection (1)(h) of

the proposal, they inexplicably used the word "assets" instead. The

suggested change is in the interest of consistency. The change at the

end of subsection (2)(f) generally follows the Business Corporation

Act.(2) Effective Changes/rom Chapter 61 Provisions: Existing Ore

gon law merely cross-references the provisions of the Business Cor

poration Act, ORS 60.637. Additional requirements are found in

ORS 61.525(2). The proposed wording assists clarity, but is not

substantively different in any major respect.

(3) Relationship to the Oregon Business Corporation Act: Ex

isting Oregon business corporation law on this subject (ORS

60.637) generally parallels the Model Act except, of course, as to

the interest of members.

65.641 KNOWN CLAIMS AGAINST DISSOLVED CORPORATION

(1) A corporation electing to dispose of known claims pursuant

to this section shall notify its known claimants in writing of the

165

f I

I

ORS 65.641

dissolution at any time after its effective date. The written noticemust:

(a) Describe information that must be included in a claim;(b) Provide a mailing address where a claim may be sent;(c) State the deadline, which may not be fewer than 120 days

from the effective date of the written notice, by which the dissolvedcorporation must receive the claim; and

(d) State that the claim will be barred if not received by thedeadline.

(2) A claim against the dissolved corporation is barred:(a) If a claimant who was given written notice under subsection

(1) of this section does not deliver the claim to the dissolved corporation by the deadline; and

(b) If a claimant whose claim was rejected by the dissolved corporation does not commence a proceeding to enforce the claimwithin 90 days from the effective date of the rejection notice.

(3) For purposes of this section, "claim" does not include a contingent liability or a claim based on an event occurring after theeffective date of dissolution. [1989 c.l0l0 § 136]


(1) Proposed Changes to the Model Act: Subsection (a) of theM.0~el Act is deleted as being redundant and surplusage. It is permISSIve rather than mandatory and simply spells out the legal effectof the statute which is adequately described in the operative sections. The mere inclusion of this process in the statute should resolve any concerns regarding the power of a dissolved corporationto avail itself of this process.

. The change in subsection (1) (subsection (b) of the Model Act) isIntended to avoid any implication that the procedures of this sectionare exclusive of other means to the same end.

(2) Effective Changes from Chapter 61 Provisions: Existing Oregon law (ORS 61.525(2)) requires a nonprofit corporation to warnits creditors as soon as it makes the decision to dissolve.

(3) Relationship to the Oregon Business Corporation Act: Theparallel section of the Business Corporation Act (ORS 60.641(2))f~llow~ the Model Act in giving the dissolving corporation completedIscretIOn as to the timing of its notice to creditors.

166

il-. _

ORS 65.644

65.644 UNKNOWN CLAIMS AGAINST DISSOLVED CORPORATION

(1) A dissolved corporation may publish notice of its dissolutionand request that persons with claims against the corporation present them in accordance with the notice.

(2) The notice must:(a) Be published at least one time in a newspaper of general cir

culation in the county where the dissolved corporation's principaloffice is located, or if the principal office is not in this state, whereits registered office is or was last located;

(b) Describe the information that must be included in a claimand provide a mailing address where the claim may be sent; and

(c) State that a claim against the corporation will be barred unless a proceeding to enforce the claim is commenced within fiveyears after publication of the notice.

(3) If the dissolved corporation publishes a newspaper notice inaccordance with subsection (2) of this section, the claim of each ofthe following claimants is barred unless the claimant commences aproceeding to enforce the claim against the dissolved corporationwithin five years after the publication date of the newspaper notice:

(a) A claimant who did not receive written notice under ORS65.641;

(b) A claimant whose claim was sent in a timely manner to thedissolved corporation but not acted on; or

(c) A claimant whose claim is contingent or based on an eventoccurring after the effective date of dissolution.

(4) A claim may be enforced under this section:(a) Against the dissolved corporation, to the extent of its undis

tributed assets; or(b) Against any person, other than a creditor of the corporation,

to whom the corporation distributed its property in liquidation subject to the following:

(A) If the distributee received a pro rata share of a distribution,the distributee's liability will not exceed the same pro rata share ofthe claim; and

(B) The distributee's total liability for all claims under this section may not exceed the total amount of assets distributed to thedistributee, less any liability of the corporation paid on behalf of

167

ORS 65.647

the corporation by that distributee after the date of distributi[1989 c.1010 § 137] on.


" (1)" .Proposed .Chang~s to the Model Act: Deletion of the wordals? I~ sUbs~ctlon (1) IS stylistic and is intended to assure that this

section IS aval1able to corporations not using ORS 65.641, ModelAct § 1~.0? The proposed changes in subsections (2) and (3) arealso styhstlc, but parallel the language of ORS 60.644.. The proposed changes in subsection (4) are in the interest of clarIty.. Drafters of t~e Model Act attempted to parallel the ModelBusmess Corporation Act changing "stockholder" references to" b" fime~ er. re erences. The final change incorporates the same setoffprovided m the Business Corporation Act.. (~) Ejfe.ctive Changes from Chapter 61 Provisions: There is no

sl~1l11ar notification by publication statute in current Oregon lawwith regard to nonprofit corporations.

(3) Relationship to the Oregon Business Corporation Act: ORS60.644 g~nerally follows the Model Act's language as to businesscorporatIOns.

(ADMINISTRATIVE DISSOLUTION)

65.647 GROUNDS FOR ADMINISTRATIVE DISSOLUTION

The Secretary of State may commence a proceeding under DRS65.651 to administratively dissolve a corporation if:

51) The corporation does not pay when due any fees imposed bythis chapter;

(2) The corporation does not deliver its annual report to the Secretary of State when due·,

(3) !he ~orporation is without a registered agent or registeredoffice m this state;. (4) ~he corporation does not notify the Secretary of State thatIts ~egIstered agent or registered office has been changed, that itsr~gIste~ed agent has resigned, or that its registered office has beendiscontinued; or

(5) The corporation's period of duration, if any, stated in its articles of incorporation expires. [1989 c.1010 § 138]

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ORS 65.651


(1) Proposed Changes to the Model Act: The proposed changes,removing the waiting periods and giving the Secretary of State discretion (by cross-reference) to commence dissolution proceedingsimmediately upon discovering a violation, parallel the changesmade in the adoption of ORS 60.647.

(2) Ejfective Changes from Chapter 61 Provisions: The relevantsection of the existing Oregon Nonprofit Corporation Law (ORS61.556) simply adopts the corresponding sections of the BusinessCorporation Act (ORS 60.647 to 60.657) by explicit cross-reference.

(3) Relationship to the Oregon Business Corporation Act: ORS60.647 is generally parallel.

65.651 PROCEDURE FOR AND EFFECf OF ADMINISTRATIVEDISSOLUTION

(1) If the Secretary of State determines that one or moregrounds exist under DRS 65.647 for dissolving a corporation, theSecretary of State shall give the corporation written notice of that

determination.(2) If the corporation does not correct each ground for dissolu-

tion or demonstrate to the reasonable satisfaction of the Secretaryof State, within 45 days after notice is given that each ground determined by the Secretary of State does not exist, the Secretary ofState shall administratively dissolve the corporation and give thecorporation notice of the dissolution, and in the case of a publicbenefit corporation shall notify the Attorney General in writing.

(3) A corporation administratively dissolved continues its corporate existence but may not carryon any activities except those necessary to wind up and liquidate its affairs under DRS 65.637 andnotify its claimants under DRS 65.641 and 65.644.

(4) The administrative dissolution of a corporation does not terminate the authority of its registered agent. [1989 c.1010 § 139]


(1) Proposed Changes to the Model Act: The proposed changesreflect the language ofORS 60.651, and thus carry forward existinglaw. The requirement of notice to the Secretary of State is droppedfrom subsection (1), since such a notice is furnished under subsec-

tion (2).

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ORS 65.654

(2) Effective Changes from Chapter 61 Provisions: The currentOregon Nonprofit Corporation Law adopts the relevant section ofthe Business Corporation Act by cross-reference. This section doesnot represent a substantive change.

(3) Relationship to the Oregon Business Corporation Act: ORS60.651 is generally parallel.

65.654 REINSTATEMENT FOLLOWING ADMINISTRATIVEDISSOLUTION

(1) A corporation administratively dissolved under ORS 65.651may apply to the Secretary of State for reinstatement. The application must:

(a) State the name of the corporation and the effective date of itsadministrative dissolution; and

(b) State that the ground or grounds for dissolution either didnot exist or have been eliminated.

(2) If the Secretary of State determines that the application contains the information required by subsection (1) of this section thatthe information is correct, and that the corporation's name sa;isfiesthe requirements of ORS 65.094, the Secretary of State shall reinstate the corporation.

(3) When reinstatement is effective, it relates back to and takeseffect as of the effective date of the administrative dissolution andthe corporation resumes carrying on its activities as if the administrative dissolution had never occurred. [1989 c.1010 § 140]


(1) Proposed Changes to the Model Act: The changes are generally consistent with ORS 60.654. Deletion of the two-year limitation, provisions dealing with the corporate name, and wordingchanges merely follow Oregon's modifications to the Model Business. Corporation Act. The Model Act's provisions relating to acertIficate of tax authorities was deemed by the Task Force to be atleast cumbersome and potentially impossible to comply with in theabsence of companion legislation requiring tax authorities to provide such certificates.

(2) Effective Changes from Chapter 61 Provisions: Because existing law cross-references ORS 60.654, this section does not represent a substantive change.

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ORS 65.657

(3) Relationship to the Oregon Business Corporation Act: TheModel Act language is nearly parallel to ORS 60.654 which currently applies to both business and nonprofit corporations.

(4) Other Comments: The deletion of the Model NonprofitCorporation Act (3)(a) parallels Oregon's departure from the analogous provisions of the Model Business Corporation Act. The drafters of the Model Act apparently expected each state to insert thenames of the state's tax collector. Since, in Oregon, taxes may beowed tG the State, to counties, and to a myriad of special taxingdistricts, inserting the name of a single taxing authority seemed inappropriate. Furthermore, the availability of compliance certificates was not clear. Accordingly, the provision was deleted.

65.657 ApPEAL FROM DENIAL OF REINSTATEMENT

(1) If the Secretary of State denies a corporation's applicationfor reinstatement following administrative dissolution, the Secretary of State shall give written notice to the corporation that explains the reason or reasons for denial.

(2) Such denial of reinstatement shall be reviewable pursuant toORS 183.484 and shall not constitute a contested case order. [1989

c.1010 § 141]


(1) Proposed Changes to the Model Act: The proposed changesmade this section generally parallel ORS 60.657. As previouslynoted, the Oregon Nonprofit Corporation Law (ORS 61.556) hasadopted that statute by reference. Thus the change reflects existing

law.(2) Effective Changes from Chapter 61 Provisions: No substan-

tive change.(3) Relationship to the Oregon Business Corporation Act: ORS

60.657 is parallel, except that the Task Force specified that appealswould be pursuant to ORS 183.484 and would not constitute a contested case order. A parallel specification is in ORS 65.744.

The Business Corporation Act makes the appeal of a denied reinstatement subject to the Oregon Administrative Procedures Act.This avoids the necessity discussed in the commentary to the ModelAct of dealing with burden of proof and standards of review. ORSChapter 60 leaves some ambiguity, in that it is not clear whether

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ORS 65.661

denial of a petition for reinstatement is a completed administrativeaction which may be appealed to the Court of Appeals or is to beheard by the Secretary of State as a contested case. The commentary on ORS Chapter 60 does not address this issue. See furtherdiscussion in the commentary to ORS 65.744.

(JUDICIAL DISSOLUTION)

65.661 GROUNDS FOR JUDICIAL DISSOLUTION

(1) The circuit courts may dissolve a corporation:(a) In a proceeding by the Attorney General if it is established

that:(A) The corporation obtained its articles of incorporation

through fraud;(B) The corporation has exceeded or abused the authority con

ferred upon it by law;(C) The corporation has fraudulently solicited money or has

fraudulently used the money solicited;(D) The corporation is a public benefit corporation and the cor

porate assets are being misapplied or wasted; or(E) The corporation is a public benefit corporation and is no

longer able to carry out its purposes;(b) Except as provided in the articles or bylaws of a religious

corporation, in a proceeding by 50 members or members holdingfive percent or more of the voting power, whichever is less, or by adirector or any person specified in the articles, if it is establishedthat:

(A) The directors are deadlocked in the management of the corporate affairs, and the members, if any, are unable to break thedeadlock;

(B) The directors or those in control of the corporation have acted, are acting or will act in a manner that is illegal, oppressive of[sic] fraudulent;

(C) The members are deadlocked in voting power and havefailed, for a period that includes at least two consecutive annualmeeting dates, to elect successors to directors whose terms haveexpired;

(D) The corporate assets are being misapplied or wasted; or

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ORS 65.664

(E) The corporation is a public benefit or religious corporationand is no longer able to carry out its purposes;

(c) In a proceeding by a creditor if it is established that:(A) The creditor's claim has been reduced to judgment, the exe

cution on the judgment has been returned unsatisfied and the corporation is insolvent; or

(B) The corporation has admitted in writing that the creditor'sclaim is due and owing and the corporation is insolvent; or

(d) In a proceeding by the corporation to have its voluntary dissolution continued under court supervision.

(2) Prior to dissolving a corporation, the court shall considerwhether:

(a) There are reasonable alternatives to dissolution;(b) Dissolution is in the public interest9 if the corporation is a

public benefit corporation; or(c) Dissolution is the best way of protecting the interests of

members, if the corporation is a mutual benefit corporation. [1989c.l0l0 § 142]


(1) Proposed Changes to the Model Act: The Task Force modifications generally follow existing Oregon law.

(2) Effective Changes from Chapter 61 Provisions: The sectionis not inconsistent with ORS 61.565. An additional ground for judicial dissolution appears in ORS 61.556, probably the miscodification of a legislative enactment. The provision is incorporated assubsection (l)(a)(C). Other changes in subsection (1) are consistentwith ORS 60.661.

(3) Relationship to the Oregon Business Corporation Act: Subsection (a) of this section generally follows ORS 60.661.

65.664 PROCEDURE FOR JUDICIAL DISSOLUTION

(1) Venue for a proceeding by the Attorney General to dissolve acorporation lies in Marion County. Venue for a proceeding broughtby any other party named in ORS 65.661 lies in the county where acorporation's principal office is located or, if the principal office isnot in this state, where its registered office is or was last located.

(2) It is not necessary to make directors or members parties to a

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proceeding to dissolve a corporation unless relief is sought againstthem individually.

(3) A court in a proceeding brought to dissolve a corporationmay issue injunctions, appoint a receiver or custodian pendente litewith all powers and duties the court directs, take other action required to preserve the corporate assets wherever located, and carryon the activities of the corporation until a full hearing can be held.

(4) A person other than the Attorney General who brings an involuntary dissolution proceeding for a public benefit or religiouscorporation shall forthwith give written notice of the proceeding tothe Attorney General who may intervene. [1989 c.1010 § 143]


(1) Proposed Changes to the Model Act: The proposed changesare stylistic and follow and parallel wording of ORS 60.664.

(2) Effective Changes from Chapter 61 Provisions: Although thewording is different, the substance of this section is generally thesame as ORS 61.565. Subsection (4), however, is new.

(3) Relationship to the Oregon Business Corporation Act: TheModel Act language parallels ORS 60.664, but is consistent withORS 61.565.

65.667 RECEIVERSHIP OR CUSTODIANSHIP

(1) A court in a judicial proceeding brought to dissolve a publicbenefit or mutual benefit corporation may appoint one or more receivers to wind up and liquidate the affairs of the corporation, orone or more custodians to manage the affairs of the corporation.The court shall hold a hearing, after notifying all parties to the proceeding and any interested persons designated by the court, beforeappointing a receiver or custodian. The court appointing a receiveror custodian has exclusive jurisdiction over the corporation and allits property wherever located.

(2) The court may appoint an individual or a domestic or foreignbusiness or nonprofit corporation, authorized to transact businessin this state, as a receiver or custodian. The court may require thereceiver or custodian to post bond, with or without sureties, in anamount the court directs.

(3) The court shall describe the powers and duties of the receiver

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ORS 65.671

or custodian in its appointing order, which may be amended periodically. Among other powers:

(a) The receiver:(A) May dispose of all or any part of the assets of the corpora

tion wherever located, at a public or private sale, if authorized bythe court, provided, however, that the receiver's power to dispose ofthe assets of the corporation is subject to any trust and other restrictions that would be applicable to the corporation; and

(B) May sue and defend in the receiver's own name as receiver ofthe corporation in all courts of this state.

(b) The custodian may exercise all of the powers of the corporation through or in place of its board of directors or officers, to theext:nt necessary to manage the affairs of the corporation in the bestinterests of its members and creditors.

(4) The court during a receivership may redesignate the receivera custodian, and during a custodianship may redesignate the CUt~to

dian a receiver, if doing so is in the best interest of the corpora lon,its members and creditors.

(5) The court periodically during the receivership or custodianship may order compensation paid and expense disbursements orreimbursements made to the receiver or custodian and the receiver's or custodian's attorney from the assets of the corporationor proceeds from the sale of the assets. [1989 c.1010 § 144]


. (1) Proposed Changes to the Model Act: The proposed changesmatch ORS 60.667, and thus continue existing law.

(2) Effective Changesfrom Chapter 61 Provisions: The languageof the Model Act parallels ORS 60.667, but is consistent with ORS61.565(4). The Oregon Nonprofit Corporation Law (ORS 61.568)expressly adopts ORS 60.667 by reference.

(3) Relationship to the Oregon Business Corporation Act: Thissection follows ORS 60.667.

65.671 DECREE OF DISSOLUTION

(1) If after a hearing the court determines that one or moregrounds for judicial dissolution described in ORS 65.661 exist, itmay enter a decree dissolving the corporation and specifying.theeffective date of the dissolution. The clerk of the court shall dehver

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ORS 65.674

a certified copy of the decree to the Office of the Secretary of Statefor filing.

(2) After entering the decree of dissolution, the court shall directthe winding up and liquidation of the corporation's affairs in accordance with ORS 65.637 and the notification of claimants in accordance with ORS 65.641 and 65.644. [1989 c.l0l0 § 145]


(1) Proposed Changes to the Mode.l Act: The proposed changesreflect the language of ORS 60.671.

(2) Effective Changes from Chapter 61 Provisions: The ModelAct language parallels that of ORS 60.671, which is adopted byspecific reference in ORS 61.591.

(3) Relationship to the Oregon Business Corporation Act: Thissection follows ORS 60.671.

(DISPOSITION OF ASSETS)

65.674 DEPOSIT WITH DIVISION OF STATE LANDS

Assets of a dissolved corporation which should be transferred toa creditor, claimant or member of the corporation who cannot befound or who is not competent to receive them shall be reduced tocash unless they are subject to known trust restrictions and deposited with the Division of State Lands for safekeeping. However, inthe discretion of the Director of the Division of State Lands, property of unusual historic or aesthetic interest may be received andheld in kind. The receiver or other liquidating agent shall prepare induplicate and under oath a statement containing the names and lastknown addresses of the persons entitled to such funds. One of thestatements shall be filed with the Division of State Lands and another shall be delivered to the Secretary of State for filing. Thefunds shall then escheat to and become the property of the State ofOregon and shall become part of the Common School Fund of thestate. The owner, heirs or personal representatives of the owner,may reclaim any funds so deposited in the manner provided for estates which have escheated to the state. [1989 c.l0l0 § 146]


(1) Proposed Changes to the Model Act: The proposed changesto the Model Act language carry forward existing Oregon law.

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ORS 65.701

(2) Effective Changes from Chapter 61 Provisions: ORS 61.595cross-referenced ORS 60.674.

(3) Relationship to the Oregon Business Corporation Act: Theadapters of the Model Business Corporation Act inserted in ORS60.674 a specific escheat provision. The statute was referenced inORS 61.595.

FOREIGN CORPORATIONS

(AUTHORITY TO TRANSACT BUSINESS)

65.701 AUTHORITY TO TRANSACT BUSINESS REQUIRED

(1) A foreign corporation may not transact business in this stateuntil it has been authorized to do so by the Secretary of State.

(2) The following activities, among others, do not constitutetransacting business within the meaning of subsection (1) of this

section:(a) Maintaining, defending or settling any proceeding.(b) Holding meetings of the board of directors or members or

carrying on other activities concerning internal corporate affairs.(c) Maintaining bank accounts.(d) Maintaining offices or agencies for the transfer, exchange

and registration of the corporation's own memberships or securitiesor maintaining trustees or depositaries with respect to those

securities.(e) Selling through independent contractors.(f) Soliciting or obtaining orders, whether by mail or through

employees or agents or otherwise, if the orders require acceptanceoutside this state before they become contracts.

(g) Creating or acquiring indebtedness, mortgages and securityinterests in real or personal property.

(h) Securing or collecting debts or enforcing mortgages and se-curity interests in property securing the debts.

(i) Owning, without more, real or personal property.(j) Conducting an isolated transaction that is completed within

30 days and that is not one in the course of repeated transactions of

a like nature.(k) Transacting business in interstate commerce.(L) Soliciting funds.

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ORS 65.704

(3) The list of activities in subsection (2) of this section is notexhaustive. [1989 c.1010 § 147]


. (1) Prop~sed Changes to the Model Act: Subsection (2)(d) is revlsed to clanfy the contemplated activity.

Subs~ction (2~(~~ is added since soliciting funds has been a partof the hst of activlties that do not constitute "transacting business"in Oregon since the Oregon Nonprofit Corporation Law was enacted in 1959. Because solicitation offunds is an important activityof many nonprofit corporations, its retention on the list isrecommended.

(2) Effective Changes from Chapter 61 Provisions: The last sentence ofORS 61.655(1) provides that a foreign corporation shall notbe denied authority to transact business in Oregon merely becausethe laws of the state or country where the corporation is organizeddiffer from Oregon's laws and that nothing in ORS Chapter 61 shallbe construed as authorizing Oregon to regulate the internal affairsof foreign corporations. The first clause of that sentence has beenadded as a new subsection (3) to ORS 65.707(3). The last clause ofthe sentence was placed in Model Act § 15.05(c), ORS 65.714(3),by the Model Act drafters. Both moves place existing law in whatappears to be more appropriate sections.

(3) Relationship to the Oregon Business Corporation Act:Closely parallels ORS 60.701.

65.704 CONSEQUENCES OF TRANSACTING BUSINESS WITHOUTAUTHORITY

(1) A foreign corporation transacting business in this state without authorization from the Secretary of State may not maintain aproceeding in any court in this state until it obtains authorizationfrom the Secretary of State to transact business in this state.

(2) The successor to or assignee of a foreign corporation thattransacted business in this state without authority to do so may notmaintain a proceeding on its cause of action in any court in thisstate until the foreign corporation or its successor obtains authorization from the Secretary of State to transact business in this state.

(3) A court may stay a proceeding commenced by a foreign corporation, its successor or assignee until it determines whether the

178

ORS 65.704

foreign corporation or its successor requires authorization from theSecretary of State to transact business in this state. If it so determines, the court may further stay the proceeding until the foreigncorporation or its successor obtains the authorization.

(4) A foreign corporation that transacts business in this statewithout authority shall be liable to this state for the years or partsthereof during which it transacted business in this state without authority in an amount equal to all fees that would have been imposedby this chapter upon such corporation had it duly applied for andreceived authority to transact business in this state as required bythis chapter and thereafter filed all reports required by this chapter.

(5) Notwithstanding subsections (1) and (2) of this section, thefailure of a foreign corporation to obtain authority to transact business in this state does not impair the validity of its corporate acts orprevent it from defending any proceeding in this state. [1989 c.1010

§ 148]


(1) Proposed Changes to the Model Act: The "certificate of authority" terminology is replaced by the existing, broader languageof the current statute. The words "or assignee of' are inserted insubsection (2) to clarify the rule that a foreign corporation may notsue on a claim it has until it is qualified to do business in Oregon.The same rule applies to the assignee of a claim held by a foreigncorporation. Section 15.02(d) of the Model Act contemplates a civilper diem penalty for a nonprofit corporation that transacts businesswithout authority. The Oregon Business Corporation Act imposesa fee recapture provision, and a like provision is suggested in thecase of nonprofit foreign corporations as well.

(2) Effective Changes from Chapter 61 Provisions: A fee recapture provision is added where none existed before. Though probably implicit in ORS 61.745(1), the Model Act makes explicit thecourt's power to stay a proceeding commenced by a foreign corporation or its successor or assignee until it determines whether thecorporation has authority to transact business. Otherwise, theModel Act does not alter the substance of ORS 61.745 but merelybreaks up the cumbersome subsection (1) into three logical and dis-

crete smaller parts.

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ORS 65.707

(3) Relationship to the Oregon Business Corporation Act: Theproposal closely parallels ORS 60.704.

(4) Other Comments: In avoiding the term "certificate of authority," the drafters of ORS 60.704 introduced a redundancythroughout this section. For example, subsections (2) and (4) eachcontain the term "transact business in this state" (or a close variation) three times. By editing to eliminate the redundancy (compareORS 60.704(2) with subsection (2)), provisions in the two Acts thatare substantively identical are worded differently.

65.707 ApPLICATION FOR AUTHORITY TO TRANSACT BUSINESS

(1) A foreign corporation may apply for authority to transactbusiness in this state by delivering an application to the Office ofthe Secretary of State for filing. The application must set forth:

(a) The name of the foreign corporation or, if its name is unavailable for use in this state, a corporate name that satisfies the requirements of ORS 65.717;

(b) The name of the state or country under whose law it isincorporated;

(c) The date of incorporation and period of duration if notperpetual;

(d) The address including street and number and mailing address,of its principal office;

(e) The address, including street and number, of its registeredoffice in this state and the name of its registered agent at that office;

(0 The names and respective addresses of the president and secretary of the foreign corporation;

(g) Whether the foreign corporation has members; and(h) Whether the corporation, if it had been incorporated in this

state, would be a public benefit, mutual benefit or religiouscorporation.

(2) The foreign corporation shall deliver with the completed application a certificate of existence or a document of similar import,current within 60 days of delivery and authenticated by the officialhaving custody of corporate records in the state or country underwhose law it is incorporated.

(3) A foreign corporation shall not be denied authority to transact business in this state by reason of the fact that the laws of thestate or country under which the corporation is organized governing

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ORS 65.711

its organization and internal affairs differ from the laws of thisstate. [1989 c.l0l0 § 149]


(1) Proposed Changes to the Model Act: The Mod~l Act requires the names and address of the current officers an~ dIrectors tobe set forth in the application. The existing law reqUIres only thenames and addresses of the president and the secretary. ~~ latterrule is retained. Subsection (3) is added to preserve the eXIstmg lawcontained in the first clause of the last sentence in ORS 61.655(1).Otherwise, the changes are minor and clarify Model Act languagewithout altering substance. .

(2) Effective Changes from Chapter 61 Provisions: SubsectIOns(1)(g) and (h) are new. SUbsect~on (3) is from ORS 61.655(1).Otherwise, the existing provision IS unchanged. .

(3) Relationship to the Oregon Business Corporation Act: VIrtually identical to ORS 60.707 except for the addition of (1)(g) and (h)

and (3).

65.711 AMENDMENT TO APPLICATION FOR AUTHORITY

(1) A foreign corporation authorized to transact business in thisstate shall deliver an amendment to the application for authority totransact business in this state to the Office of the Secretary of Statefor filing if it changes:

(a) Its corporate name as shown on the records of the office; or

(b) The period of its duration.(2) The amendment to the application for authority to transact

business in this state shall set forth the corporate name shown onthe records of the office and the new corporate name or the newperiod of duration. The corporate name as changed must satisfy therequirements of ORS 65.717. [1989 c.l0l0 § 150]


(1) Proposed Changes to the Model Act: The proposed ~hangesbring this provision in line with its paral!e~ co~nterpart m ORSChapter 60. The provision describes a m1DIstenal procedure andthe changes reflect that procedure as it is followed in Oregon.

(2) Effective Changes from Chapter 61 Provisions: None.

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ORS 65.714

(3) Relationship to the Oregon Business Corporation Act: Substantially identical to ORS 60.711.

65.714 EFFECT OF AUTHORITY

(1) A foreign corporation authorized to transact business in thisstate has the same but no greater rights and enjoys the same but nogre~ter pr!vileges as, and except as otherwise provided by this chapter IS subject to the same duties, restrictions, penalties and liabilities now or later imposed on a domestic corporation of likecharacter.

(2) The filing by the Secretary of State of an application oramendment to the application for authority to transact businessshall constitute authorization to transact business in this state, subject to the right of the Secretary of State to revoke theauthorization.

(3) This chapter does not authorize this state to regulate the organization or internal affairs of a foreign corporation authorized totransact business in this state. [1989 c.1010 § 151]


(1) Pr~posed Changes to the Model Act: Subsection (2) providesthat the filing by the office of the Secretary of State of an applicationor amendment to the application for authority to transact businessconstitutes authorization to transact business. Otherwise, thechanges are made for clarification and not to alter substance.


cal to ORS 60.714.(4) Other Comments: The Task Force faced the dilemma of

employing the language of ORS Chapter 60 or using different language for a substantively identical provision. Whether the phrase"the same but no greater rights," ORS 60.714(1), is more precisethan "the same rights," Model Act § 15.05(a), is debatable. In theinterest of uniformity, the Task Force resisted the temptation to editChapter 60.

65.717 CORPORATE NAME OF FOREIGN CORPORATION

(1) Except as provided in subsection (2) of this section, the Secretary of State shall not authorize a foreign corporation to transact

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ORS 65.717

business in this state unless the corporate name of the corporationsatisfies the requirements of ORS 65.094.

(2) If a corporate name, professional corporate name, businesscorporate name, cooperative name, limited partnership name, business trust name, reserved name, registered corporate name or assumed business name of active record with the office is notdistinguishable on the records of the office from the corporate nameof the applicant foreign corporation, the Secretary of State shallnot authorize the applicant to transact business in this state unlessthe foreign corporation states the corporate name on the applicationfor authority to transact business in this state under ORS 65.707 as"(name under which incorporated), a corporation of (place of incorporation)," the entirety of which shall be the real and true name ofthe corporation under ORS chapter 648.

(3) If a foreign corporation authorized to transact business inthis state changes its corporate name to one that does not satisfythe requirements of ORS 65.094, it shall not transact business inthis state under the changed name until it adopts a name satisfyingthe requirements of ORS 65.094 and delivers to the Office of theSecretary of State for filing an amendment to the application forauthority under ORS 65.711. [1989 c.1010 § 152]


(1) Proposed Changes to the Model Act: The principal changesare a result of changes made by ORS 65.094 by comparison withModel Act § 4.01. Model Act § 15.06(a) is more concisely stated inORS 65.094, hence the proposal references ORS 65.094 without restating it. Proposed subsection (1) thus parallels ORS 60.717(1), itscorresponding provision.

The provisions of subsection (b) of the Model Act are replacedby language identical to that in ORS 60.717(3). The revised provision specifies other entities, such as limited partnerships, cooperatives, and business trusts, whose names must remain distinguishablefrom the applicant foreign corporation.

Model Act § 15.06(c)(2) appears at ORS 65.094(5) instead of

here.Subsection (d) of the Model Act is deleted as an unnecessary

statement of existing law.In subsection (3), corresponding to subsection (e) of the Model

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ORS 65.721

:;ct, .the changes merely reflect the change in terminology frocertificate of authority" to "application for authority." m

(2). Effective Changes from Chapter 61 Provisions: There ieffectIve change. s no

(3) Relationship to the Oregon Business Corporation Act: Theproposal corresponds to ORS 60.717.

65.721 REGISTERED OFFlCE AND REGISTERED AGENT OFFOREIGN CORPORATION

Each foreign corporation authorized to transact business in thisstate shall continuously maintain in this state both:

(1) A registered agent, who shall be:(a) An individual who resides in this state;.(b) A domestic business or nonprofit corporation with an offic .

thIS state; or e m

(c) A for~ign ~usin~ss or nonprofit corporation authorized totransact busmess m thIS state with an office in this state' and

(2) A registered office of the foreign corporation whic~ shall bthe address, including street and number, of the re;idence or offic:of the registered agent. [1989 c.l0l0 § 153]


(1) Proposed Changes to the Model Act: The revisions reflectthe changes pr?posed to ?RS 65.111 by comparison with ModelAct § 5.01, WhICh deals wIth the same subject matter for domesticnonprofit corporations.

(2) Effe~tive Cha?ges from Chapter 61 Provisions: The proposalwould permIt a locatIOn other than a business office to be the registered office.

(3) Relationship to the Oregon Business Corporation Act: Seecomment to ORS 65.111.

65.724 CHANGE OF REGISTERED OFFICE OR REGISTERED AGENTOF FOREIGN CORPORATION

(1) A foreign corporation authorized to transact business i~ this~tate may change its registered office or registered agent by delivermg to the Office of the Secretary of State for filing a statement ofchange that sets forth:

(a) The name of the foreign corporation;

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ORS 65.727

(b) If the current registered office is to be changed, the address,including the street and number, of the new registered office;

(c) If the current registered agent is to be changed, the name ofthe new registered agent and a statement that the new agent has

consented to the appointment; and(d) A statement that after the change or changes are made, the

street addresses of its registered office and the office or residenceaddress of its registered agent will be identical.

(2) If the registered agent changes the street address of theagent's office or residence, the registered agent shall change thestreet address of the registered office of any foreign corporation forwhich the agent is the registered agent by notifying the corporationin writing of the change and signing, either manually or in facsimile, and delivering to the Office of the Secretary of State for filing astatement of change that complies with the requirements of subsection (1) of this section and recites that the corporation has been

notified of the change.(3) The filing of the statement under this section by the Office of

the Secretary of State shall terminate the existing registered officeor agent, or both, on the effective date of the filing by the Office ofthe Secretary of State and establish the newly appointed registeredoffice or agent, or both, as that of the foreign corporation. [1989

c.l0l0 § 154]


(1) Proposed Changes to the Model Act: The Model Act is revised to reflect changes previously made by ORS 65.114 by comparison with Model Act § 5.02, which deals with the same subject

matter for domestic nonprofit corporations.(2) Effective Changesfrom Chapter 61 Provisions: See comment

to proposed ORS 65.114.(3) Relationship to the Oregon Business Corporation Act: See

comment to proposed ORS 65.114.

65.727 RESIGNATION OF REGISTERED AGENT OF FOREIGN

CORPORATION

(1) The registered agent of a foreign corporation may resign asagent by delivering a signed statement of resignation to the Officeof the Secretary of State for filing. The statement of resignation

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ORS 65.731

may include a statement that the registered office is alsodiscontinued.

(2) Upon receipt of the signed statement in proper form, the Secretary of State shall file the resignation statement and shall immediately notify the foreign corporation that the statement has beenfiled. The notice shall be addressed to the foreign corporation at theforeign corporation's mailing address or the foreign corporation'sprincipal office as shown on the records of the Office of the Secretary of State.

(3) The agency appointment is terminated, and the registered office discontinued if so provided in the signed statement under subsection (1) of this section on the 31st day after the date on whichthe statement was filed by the Office of the Secretary of State unless the foreign corporation sooner appoints a successor registeredagent as provided in ORS 65.724, thereby terminating the capacityof the prior agent. [1989 c.1010 § 155]


(1) Proposed Changes to the Model Act: Subsections (1) and (2)merely describe the procedure used in the office of the Secretary ofState to process the resignation of a registered agent. Changes reflect the existing practice in Oregon.

Subsection (3) of the Model Act provides that the agency is terminated on the 31st day after the resignation statement is filed.Language is added to the subsection to cover the situation where asuccessor registered agent is appointed during the 31-day period. Insuch a case, the former agency is terminated upon the appointmentof the successor registered agent.

(2) Effective Changes from Chapter 61 Provisions: None.(3) Relationship to the Oregon Business Corporation Act: The

proposal has been revised to parallel ORS 65.117 by comparisonwith Model Act § 5.03. The language in subsection (3) in particularwas revised and clarified by ORS 65.117.

65.731 SERVICE ON FOREIGN CORPORATION

The provisions of ORS 60.731, relating to service on foreign corporations, shall apply to foreign nonprofit corporations, except thatfor the purpose of this section the reference therein to "this chapter" means chapter 65. [1989 c.1010 § 156]

186

ORS 65.734


(1) Proposed Changes to the Model Act: As noted in comment(1) to ORS 65.121, the service provisions of the Model Act differsubstantially from those of the Oregon Business Corporation Act,which is incorporated by reference in Chapter 61. Like ORS65.121, this section incorporates by reference its counterpart inORS Chapter 60 both for consistency with the Business Corporation Act and to avoid inadvertent conflict with the Oregon Rules ofCivil Procedure.

(2) Effective Changes from Chapter 61 Provisions: None.(3) Relationship to the Oregon Business Corporation Act: Incor

porates by reference ORS 60.731.

(WITHDRAWAL)

65.734 WITHDRAWAL OF FOREIGN CORPORATION

(1) A foreign corporation authorized to transact business in thisstate may apply to the Office of the Secretary of State to withdrawfrom this state. The application shall set forth:

(a) The name of the foreign corporation and the name of thestate or country under whose law it is incorporated;

(b) That it is not transacting business in this state and that itsurrenders its authority to transact business in this state;

(c) That it revokes the authority of its registered agent to acceptservice on its behalf and appoints the Secretary of State as its agentfor service of process in any proceeding based on a cause of actionarising during the time it was authorized to transact business in this

state;(d) A mailing address to which the person initiating any proceed

ings may mail to the foreign corporation a copy of any processserved on the Secretary of State under paragraph (c) of this subsec-

tion; and(e) A commitment to notify the Secretary of State for a period of

five years from the date of withdrawal of any change in the ~ailing

address.(2) Upon filing by the Office of the Secretary of State of the

application to withdraw, the authority of the foreign corporation totransact business in this state shall cease. [1989 c.1010 § 157]

187

ORS 65.737


(1) Proposed Changes to the Model Act: Model Act§ 15.20(1)(c) is deleted because it is covered by ORS 65.731, whichincorporates by reference ORS 60.731(2)(d). The Model Act requirement that the application for withdrawal contain a commitment to notify the Secretary of State "in the future" of any newmailing address is changed to a commitment to give such notice fora 5-year period. A new subsection (2) is added to fix the time thatthe authority of the foreign corporation to transact business ceases.Otherwise, the changes from the Model Act are largely stylistic,rather than substantive. In addition, the changes track thoseadopted in ORS 60.734.


cal to ORS 60.734.

(ADMINISTRATIVE REVOCATION OF AUTHORITY)

65.737 GROUNDS FOR ADMINISTRATIVE REVOCATION

The Secretary of State may commence a proceeding under ORS65.741 to revoke the authority of a foreign corporation to transactbusiness in this state if:

(1) The foreign corporation does not deliver its annual report tothe Secretary of State within the time prescribed by this chapter;

(2) The foreign corporation does not pay within the time prescribed by this chapter any fees imposed by this chapter;

(3) The foreign corporation has failed to appoint or maintain aregistered agent or registered office in this state as prescribed bythis chapter;

(4) The foreign corporation does not inform the Secretary ofState under ORS 65.724 or 65.727 that its registered agent or registered office has changed, that its registered agent has resigned, orthat its registered office has been discontinued; or

(5) The Secretary of State receives a duly authenticated certificate from the official having custody of corporate records in thestate or country under whose law the foreign corporation is incorporated stating that it has been dissolved or disappeared as the result of a merger. [1989 c.l0l0 § 158]

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ORS 65.741


(1) Proposed Changes to the Model Act: The ~h~nges to subsection (1) are made to clarify and to conform to eXlstmg Oregon terminology. Model Act § 15.30(a)(5) (intentional false filing) hasbecome a ground for judicial revocation, ORS 65.171(a)(E).

Subsection (b) of the Model Act would permit the AttorneyGeneral to commence an administrative proceeding to revoke theauthority of a foreign corporation to transact business in Oregon ongrounds diff~rent from that under a proceeding brought by the Secretary of State. No comparable proceeding exists under present Oregon law. The grounds proposed for a proceeding commenced b~the Attorney General require a much more intensive factual examlnation than do the grounds for a proceeding commenced by theSecretary of State. Under present law, the closest ~ounterpart .t~ anAttorney General revocation proceeding is found m the provl~lons

dealing with judicial dissolution of domestic nonpro~t corpo:atlons.See ORS 61.556 and 61.565. Given the goal oftreatmg forelgn corporations like domestic corporations to the greatest extent possible,it makes little sense to provide for a judicial dissolution of a domestic nonprofit corporation while not providing fo~ a jUd~cial revo~ation of authority of a foreign nonprofit corporatlOn whlch commltsthe same violations.

Accordingly, provision for a proceeding to be commenced by theAttorney General is added as ORS 65.751 to 65.757.

(2) Effective Changes from Chapter 61 Provisions: None.(3) Relationship to the Oregon Business Corporation Act: Al

most identical to ORS 60.737, except for deletion of intentionalfalse filing as explained in comment (1).

65.741 PROCEDURE FOR AND EFFECT OF ADMINISTRATIVEREVOCATION

(1) If the Secretary of State determines that one or moregrounds exist under ORS 65.737 for revocation of authority of aforeign corporation to transact business in this state, the Secretaryof State shall give the foreign corporation written notice of thatdetermination.

(2) If the foreign corporation does not correct each ground forrevocation or demonstrate to the reasonable satisfaction of the Secretary of State, within 45 days after notice is given, that each

189

ORS 65.741

groun~ for revocation determined by the Secretary of State doesnot ~XISt, the S~cr~tary of State shall administratively revoke thef?relgn corporation s authority and give the foreign corporation notice of the revocation, and in the case of a foreign corporation thatwould.hav~ been a public benefit corporation had it been incorporated m this state, shall notify the Attorney General in writing.

,<3) The authority of a foreign corporation to transact business inthis state ceases as of the date of revocation of its authority ttransact business in this state. 0

(4) ~he Secretary of State's revocation of a foreign corporation'sauthority to transact business in this state appoints the Secretary ofState t~e foreign corporation's agent for service of process in anyproceed~ng based on. a cause of action which arose during the timethe foreign corporation was authorized to transact business in thisstate.

(~) Re~ocati.on of a foreign corporation's authority to transactbusmess m this state terminates the authority of the registeredagent of the corporation. [1989 c.l0l0 § 159; 1991 c.231 § 12]


(1) Proposed Changes to the Model Act: Subsection (b) of theModel Act is deleted, as the Attorney General procedure is nowcovered at ORS 65.754 and 65.757. See commentary to ORS65.737.

In sUb~ection (2), 45 instead of 60 days are allowed for a foreigncorporation to correct each ground for revocation or to demonstratetha.t a ground fo~ revocation does not exist. In subsection (5), revocati~n of a foreign corporation's authority does terminate the au~honty of ~he registered agent under ORS 60.731(2)(b),Incorporated Into ORS 65.731 by reference. The last sentence ofModel Act subsection (e) is deleted because the subject is now inORS 65.731, incorporating ORS 60.731.. Otherwise, the changes to this section of the Model Act are stylis

tl~ and r.effect the different terminology. The changes also conformthiS section to the existing language of Chapter 61.. (2) Effective Changes from Chapter 61 Provisions: The revocat~on procedure is governed and guided by the Oregon Administrative Procedures Act, ORS Chapter 183. That is made clear in thefollowing section, ORS 65.744, Model Act § 15.32. The overlay of

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ORS 65.744

the APA permits the skeletal description of procedure set forth in

ORS 65.741.(3) Relationship to the Oregon Business Corporation Act: The

section is substantially identical to ORS 60.741.


The deletion is made at the request of the Office of the Secretaryof State with the assent of the Department of Justice.

65.744 ApPEAL FROM ADMINISTRATIVE REVOCATION

In addition to any other legal remedy which may be available, aforeign corporation shall have the right to appeal the Secretary ofState's revocation of its authority to transact business in this statepursuant to the provisions of ORS 183.310 to 183.550. Such revocation shall be reviewable pursuant to ORS 183.484 and shall notconstitute a contested case order. [1989 c.l0l0 § 160]


(1) Proposed Changes to the Model Act: The Model Act sectionis largely rejected in favor of the existing provision which properlyrefers to the Oregon Administrative Procedures Act as providingthe ordinary vehicle for review of revocation.

(2) Effective Changes from Chapter 61 Provisions: The existingprovision refers to a foreign corporation's right to appeal under theOregon Administrative Procedures Act (ORS 183.310 to 183.550).Left open is the question whether such an appeal would constitute areview of a contested case (ORS 183.482) or of an order other thana contested case order (ORS 183.484). Given the basically ministerial grounds for administrative revocation set forth in Model Act§ 15.30 and the existing practice of not holding contested case hearings on such matters, the Task Force chose to specify review underORS 183.484 here, as in ORS 65.657(2). See commentary to ORS65.657. The last sentence of ORS 65.744 is borrowed from ORS279.019, which specifies review under ORS 183.484 where the Director of the Department of General Services exempts a public contract from the competitive bidding requirements of Chapter 279.

(3) Relationship to the Oregon Business Corporation Act: Identical to ORS 60.744, except for the addition of the second sentence.

See preceding commentary.

191

'..

ORS 65.747

65.747 REINSTATEMENT FOLLOWING ADMINISTRATIVEDISSOLUTION

(1) A foreign corporation which has had its authority revokedunder ORS 65.737 may apply to the Secretary of State for reinstatement. The application shall:

(a) State the name of the corporation and the effective date itsauthority was revoked; and

. (b) S!ate that the ground or grounds for revocation of authorityeither did not exist or have been eliminated.

,<2) If the Secretary of State determines that the application contams the information required by subsection (1) of this section thatthe information is correct and that the corporation's name satisfiesthe requirements of ORS 65.717, the Secretary of State shall reinstate the authority.

(3) When the reinstatement is effective, it relates back to andtakes eff~ct as of the effective date of the administrative revocationof authority and the corporation resumes carrying on its business asif the administrative revocation of authority had never occurred[1989 c.1010 § 160a] •

OFFICIAL COMMENT TO DRS 65.747 (MODEL ACT § (NONE))

(1) Propo~ed Changes to the Model Act: No counterpart.(2) Effective Changes From Chapter 61 Provisions: None.(3) R~l~tionship to the Oregon Business Corporation Act: A par

allel provIsion appears at DRS 60.747.

(JUDICIAL REVOCAnON OF AUTHORITY)

65.751 GROUNDS FOR JUDICIAL REVOCATION

. (1) •The circui~ courts may revoke the authority of a foreign corporatIOn to transact business in this state:

(a) In a proceeding by the Attorney General if it is establishedthat:. (A~ The corporation obtained its authority to transact businessm this state through fraud;

(B) The corporation has exceeded or abused the authority conferred upon it by law;

(C) The corporation would have been a public benefit corpora-

192

ORS 65.751

tion had it been incorporated in this state and its corporate assets

are being misapplied or wasted;(D) The corporation would have been a public benefit corpora-

tion had it been incorporated in this state and it is no longer able to

carry out its purposes;(E) An incorporator, director, officer or agent of the corporation

signed a document knowing it was false in any material respect withthe intent that the document be delivered to the Office of the Secre-

tary of State for filing; or(F) The corporation has fraudulently solicited money or has

fraudulently used the money solicited.(b) Except as provided in the articles or bylaws of a foreign cor

poration that would have been a religious corporation had it beenincorporated in this state, in a proceeding by 50 members or members holding five percent or more of the voting power whichever isless, or by a director or any person specified in the articles, if it is

established that:(A) The directors are deadlocked in the management of the cor-

porate affairs, and the members, if any, are unable to break the

deadlock;(B) The directors or those in control of the corporation have ac-

ted, are acting, or will act in a manner that is illegal, oppressive or

fraudulent;(C) The members are deadlocked in voting power and have

failed, for a period that includes at least two consecutive annualmeeting dates, to elect successors to directors whose terms have

expired;(D) The corporate assets are being misapplied or wasted; or(E) The corporation is a foreign corporation that would have

been a public benefit or religious corporation had it been incorporated in this state, and is no longer able to carry out its purposes.

(c) In a proceeding by a creditor if it is established that:(A) The creditor's claim has been reduced to judgment, the exe

cution on the judgment returned unsatisfied, and the corporation is

insolvent; or(B) The corporation has admitted in writing that the creditor's

claim is due and owing and the corporation is insolvent.(2) Prior to revoking a corporation's authority, the court shall

consider whether:

193

ORS 65.751

(a) There are reasonable alternatives to revocation of authority;~) ~evocationof authority is in the public interest, if the corpo

ration IS a foreign corporation that would have been a public benefitcorporation had it been incorporated in this state; or

(c) Revocation of authority is the best way to protect the interests of members, if the corporation is a foreign corporation thatwould have been a mutual benefit corporation had it been incorporated in this state. [1989 c.1010 § 161]


(1) Proposed Changes to the Model Act: The Model Act contains no provision for judicial revocation. Model Act §§ 15.30 and15.31 provide for a proceeding to be initiated by the Attorney General on the grounds that the corporation has exceeded or abused itsauthorit~, or tha~ the corporation would have been a public benefitcorporatIOn had It been incorporated in this state and that its corporate assets ar~ being misapplied or wasted or that it is no longer ableto carry out Its purpose. However, the proceeding contemplated inthe Model Act is administrative.

Subsection (l)(a)(A) is taken from ORS 65.66l(1)(a)(A), ModelAct § l4.30(a)(1)(i); it is a ground for judicial dissolution of a domestic business corporation. The grounds for an Attorney Generalprocee~ing set forth in the Model Act have been incorporated intosubsectIons (1)(a)(B), (C) and (D). Subsection (l)(a)(E) is takenfrom ORS 60.737(5) as incorporated by ORS 61.732, correspondingto Model Act § l5.30(a)(5). See commentary in (2) below. Subsec~io~ ~l)(a!(F) is. taken from ORS 61.556 and is another ground forJudICIal dIssolutIOn of a domestic corporation. Except for the addedground of intentional false filing, the six grounds for judicial revocation in a proceeding before the Attorney General under this subsection parallel the grounds for judicial distribution in a proceedingbefore the Attorney General under ORS 65.66l(a). See generallycommentary to ORS 65.737.

In addition, the proposal permits members or creditors of thecorporation to initiate a judicial proceeding to revoke the corporation's authority.

Subsection (2) requires the court to consider certain factors indete.rmining whether revocation is an appropriate remedy; this subsectIon has no counterpart in the Model Act.

194

ORS 65.751

(2) Effective Changes From Chapter 61 Provisions: Revokingthe authority of a foreign corporation is, in some w~ys, analogou~ tothe involuntary dissolution of a domestic corporatIon. If a fore..

gn

corporation is to enjoy the same rights and privileges, and be subjectto the same restrictions, as a domestic corporation, the ground~ forinvoluntary revocation should parallel those for involuntar~ dISSOlution, insofar as the internal affairs of the foreign corporatIon are

not thereby regulated by the state.The proposed change is somewhat comparable to .ORS 61.565

which provides for a proceeding in circu~t c~urt to dIssolve a domestic nonprofit corporation under certam cIrcumstances. UnderORS 60.661(1), the Attorney General may bring a proceeding todissolve a domestic business corporation if it is established that thecorporation obtained its articles of incorporation through frau? orhas continued to exceed or abuse the authority conferred upon It bylaw. A provision synthesizing these two sections is proposed asORS 65.664, Model Act § 14.30, to govern domestic nonprofit corporations. Added as additional grounds for ~evo~~tion are t~ewaste or misapplication of corporate assets, the mabllIty of a publicbenefit corporation to carry out its purposes, the fraudulent use orsolicitation of funds, and the execution of a false documen~ by acorporate official with the intent that the document be filed WIth ~heSecretary of State. Under present Oregon law, the latter ground IS aground for administrative revocation by t~e Se~retary of St~te. Believing that such a ground requires more mte~slv~ f~c~-findmg thanthe other grounds for administrative revocatIon, It IS mcluded as a

ground for judicial revocation instead.(3) Relationship to the Oregon Business Corporation Act: No

comparable provision for judicial revocation. . .. .(4) Other Comments: Recommending a JudICIal proceedmg,

rather than an administrative one, for serious charges of wrongdoing is proposed as a safeguard in wha~ .could b~, among otherthings, a politically sensitive area. A polItIcally onented nonprofitcorporation could not have its authority revoked on th~ ground, :orexample, that it had continued to exceed or abuse It~ authonty,without the procedural protection of a judicial proceedmg. O~ theother hand, where the cause for revocation stems from a baSIcallyministerial reason, such protection is not necessary.

195

r

ORS 65.754

65.754 PROCEDURE }<'OR JUDICIAL REVOCATION OF AUTHORITY

(1) Venue for a proceeding by the Attorney General to revoke aforeign corporation's authority lies in Marion County. Venue for aproceeding brought by any other person named in ORS 65.751 liesin the county where a corporation's principal Oregon office is located or where its registered office is or was last located.

(2) It is not necessary to make directors or members parties to aproceeding to revoke the authority of a corporation.

(3) A court in a proceeding brought to revoke a corporation'sauthority may issue injunctions, appoint a receiver or custodianpendente lite with all powers and duties the court directs, take otheraction required to preserve the corporate assets located in Oregonand carryon the corporation's Oregon activities until a full hearingcan be held.

(4) A person other than the Attorney General who brings a revocation proceeding for a foreign corporation that would have been apublic benefit or religious corporation had it been incorporated inthis state, shall forthwith give written notice of the proceeding tothe Attorney General who may intervene. [1989 c.1010 § 162]


(1) Proposed Changes to the Model Act: No comparable ModelAct provision. See commentary to ORS 65.737.

(2) Effective Changes from Chapter 61 Provisions: Chapter 61contains no procedure for the judicial revocation of authority. The~ro~i.sion .is pat~erned after ORS 61.565(2), (3), and (4), governingJUdICial dIssolutIon. Subsection (4) is taken from ORS 65.664(4),Model Act § 14.31(d).

(3) Relationship to the Oregon Business Corporation Act: Nocomparable provision for judicial revocation.

65.757 DECREE OF REVOCATION

(1) If after a hearing the court determines that one or moregrounds for judicial revocation of authority described in ORS65.751 exists, it may enter a decree revoking the corporation's authority to transact business in Oregon and specifying the effectivedate of the revocation. The clerk of the court shall deliver a certified copy of the decree to the Office of the Secretary of State forfiling.

196

ORS 65.771

(2) The authority of a foreign corporation to transact business inOregon ceases as of the date of the decree of revocation.

(3) The decree of revocation of a foreign corporation's authorityto transact business in this state appoints the Secretary of State theforeign corporation's agent for service of process in any proceedingbased on a cause of action which arose during the time the foreigncorporation was authorized to transact business in this state.

(4) Revocation of a foreign corporation's authority to transactbusiness in this state terminates the authority of the registeredagent of the corporation. [1989 c.1010 § 163]


(1) Proposed Changes to the Model Act: There is no comparableprovision in the Model Act. See commentary to ORS 65.737.

(2) Effective Changes from Chapter 61 Provisions: This sectionis modeled after ORS 61.591 and 60.671 relating to judicial decreesof dissolution.

(3) Relationship to the Oregon Business Corporation Act: Noprovision for judicial revocation.

RECORDS AND REPORTS

(RECORDS)

65.771 CORPORATE RECORDS

(1) A corporation shall keep as permanent records minutes of allmeetings of its members and board of directors, a record of all corporate action taken by the members or directors without a meeting,and a record of all actions taken by committees of the board ofdirectors in place of the board of directors on behalf of thecorporation.

(2) A corporation shall maintain appropriate accounting records.(3) A corporation or its agent shall maintain a record of its mem

bers in a form that permits preparation of a list of the name andaddress of all members, in alphabetical order by class showing thenumber of votes each member is entitled to vote.

(4) A corporation shall maintain its records in written form or inanother form capable of conversion into written form within a reasonable time.

197

DRS 65.771

(5) A corporation shall keep a copy of the following records forinspection:

(a) Articles or restated articles of incorporation and all amendments to them currently in effect;

(b) Bylaws or restated bylaws and all amendments to them currently in effect;

(c) Resolutions adopted by its board of directors relating to thecharacteristics, qualifications, rights, limitations and obligations ofmembers of any class or category of members;

(d) The minutes of all meetings of members and records of allactions approved by the members for the past three years;

(e) Written communications required by this chapter and thoseregarding general membership matters made to members within thepast three years;

(f) A list of the names and business or home addresses of its current directors and officers;

(g) The last three annual financial statements, if any. The statements may be consolidated or combined statements of the corporation and one or more of its subsidiaries or affiliates, as appropriate,including a balance sheet and statement of operations, if any, forthat year. If financial statements are prepared for the corporationon the basis of generally accepted accounting principles, the annualfinancial statements must also be prepared on that basis;

(h) The last three accountant's reports if annual financial statements are reported upon by a public accountant; and

(i) The most recent annual report delivered to the Secretary ofState under ORS 65.787. [1989 c.1010 § 164]

OFFICIAL COMMENT TD ORS 65.771 (MODEL ACT § 16.01)

(1) Proposed Changes to the Model Act: Subsection (1) wasamended to insert a paraphrase in place of the ambiguously wordedcross-reference to Model Act § 8.25(d), corresponding to ORS65.354(4). The change makes subsection (1) essentially identical tothe language of ORS 60.771(1).

Subsection (5)(e) was amended to require keeping only generalmembership matters for three years. Subsection (5)(g) was added torequire that annual financial statements are maintained for inspection rather than requiring that an annual financial statement to befurnished to each member.

198

DRS 65.774

(2) Effective Changes from Chapter 61 Provisions: Current lawdoes not specify what records must be kept. This section stateswhat must be kept, specifies which records must be kept permanently, and it restricts the location of the records to the corporation's principal office.

These changes provide more definite guidelines regarding recordkeeping.


65.774 INSPECTION OF RECORDS BY MEMBERS

(1) Subject to subsection (5) of this section and ORS 65.777 (3),a member is entitled to inspect and copy, at a reasonable time andlocation specified by the corporation, any of the records of the corporation described in ORS 65.771 (5) if the member gives the corporation written notice of the member's demand at least fivebusiness days before the date on which the member wishes to inspect and copy.

(2) Subject to subsection (5) of this section, a member is entitledto inspect and copy, at a reasonable time and reasonable locationspecified by the corporation, any of the following records of thecorporation if the member meets the requirements of subsection (3)of this section and gives the corporation written notice of the member's demand at least five business days before the date on whichthe member wishes to inspect and copy:

(a) Excerpts from any records required to be maintained underORS 65.771 (1), to the extent not subject to inspection under subsection (1) of this section;

(b) Accounting records of the corporation; and(c) Subject to ORS 65.782, the membership list.(3) A member may inspect and copy the records identified in sub

section (2) of this section only if:(a) The member's demand is made in good faith and for a proper

purpose;(b) The member describes with reasonable particularity the pur-

pose and the records the member desires to inspect; and(c) The records are directly connected with this purpose.(4) This section does not affect:(a) The right of a member to inspect records under ORS 65.224

199

I ~I

i

Il _ 1

!IIr!

,I

ORS 65.774

or, if the member is in litigation with the corporation, to the sameextent as any other litigant; or

(b) The power of the court, independently of this chapter, tocompel the production of corporate records for examination.

(5) (a) The articles or bylaws of a religious corporation may limitor abolish the right of a member under this section to inspect andcopy any corporate record.

(b) The articles of a public benefit corporation organized primarily for political or social action, including but not limited to political or social advocacy, education, litigation or a combinationthereof, may limit or abolish:

(A) The right of a member to obtain from the corporation information as to the identity of contributors to the corporation; and

(B) The right of a member or the member's agent or attorney toinspect or copy the membership list if the corporation provides areasonable means to mail communications to other membersthrough the corporation at the expense of the member making therequest. [1989 c.1010 § 165]


(1) Proposed Changes to the Model Act: There are changes requiring a member's written notice of the member's demand ratherthan using "written notice" or "written demand." The amendmentresults in parallel language to ORS 60.774. A special provision thatgoes beyond the Model Act has been added to further assure theability of nonprofit corporations to restrict access to the membership list and the names of contributers of political advocacy andsocial action public benefit corporations. See commentary to ORS65.224.

(2) Effective Changes from Chapter 61 Provisions: Current lawis very general and does not provide the corporation with guidelinesto decide whether the purpose of the requested inspection is properand which records may be inspected. The current law affords aremedy if the corporation is not reasonable, but the remedy requiresthe member to have the courts enforce the member's rights.


200

ORS 65.781

65.777 SCOPE OF INSPECTION RIGHT

(1) A member's agent or attorney has the same inspection andcopying rights as the member the agent or attorney represents.

(2) The right to copy records under ORS 65.774 includes, if reasonable, the right to receive copies made by photographic, xerographic or other means.

(3) The corporation may impose a reasonable charge, coveringthe costs of labor and material, for copies of any documents provided to the member. The charge may not exceed the estimated.costof production or reproduction of the records.

(4) The corporation may comply with a member's demand to inspect the record of members under ORS 65.774 (2)(c) by providingthe member with a list of its members that was compiled no earlierthan the date of the member's demand. [1989 c.1010 § 166]


(1) Proposed Changes to the Model Act: None.(2) Effective Changes from Chapter 61 Provisions: Current law

does not afford guidelines for compliance with a members request toinspect.

(3) Relationship to the Oregon Bu.siness Corporation Act: Thissection parallels ORS 60.777.

65.781 COURT-ORDERED INSPECTION

(1) If a corporation does not allow a member who complies withORS 65.774 (1) to inspect and copy any records required by ORS65.774 (1) to be available for inspection, the circuit court in thecounty where the corporation's principal office, or, if none in thisstate its registered office, is located may summarily order inspec-, . ,tion and copying of the records demanded at the corporation sex-pense upon application of the member.

(2) If a corporation does not within a reasonable time allow amember to inspect and copy any other record, the member whocomplies with ORS 65.774 (2) and (3) may apply to the circuit courtin the county where the corporation's principal office, or, if none inthis state, its registered office, is located for an order to permit inspection and copying of the records demanded.

(3) If the court orders inspection and copying of the records demanded, it shall also order the corporation to pay the member's

201

ORS 65.784

I"

Lri(I,1

"I

I!

1,:1'"~ ;;"I! .

-'! ,.

ORS 65.782

costs, including reasonable attorney fees, incurred to obtain the order unless the corporation proves that it refused inspection in goodfaith because it had a reasonable basis for doubt about the right ofthe member to inspect the records demanded.

(4) If the court orders inspection and copying of the records demanded, it may impose reasonable restrictions on the use or distribution of the records by the demanding member.

(5) No order shall be issued under this section without notice tothe corporation at least five days in advance of the time specifiedfor the hearing unless a different period is fixed by the court. Themember's request shall be set for hearing at the earliest possibletime and shall take precedence over all matters, except matters ofthe same character and hearings on preliminary injunctions underORCP 79 B.(3). [1989 c.1010 § 167]


(1) Proposed Changes to the Model Act: Subsection (5) has beenadded.

(2) Effective Changes from Chapta 61 Provisions: This sectionprovides more guidance to the courts by specifying which recordsmust be furnished, the requirements for inspection and guidelinesfor the judicial proceedings.


65.782 LIMITATIONS ON USE OF MEMBERSHIP LIST

Without consent of the board, a membership list or any part of amembership list may not be obtained or used by any person for anypurpose unrelated to a member's interest as a member. Withoutlimiting the generality of this section, without the consent of theboard, a membership list or any part thereof may not be:

(1) Used to solicit money or property unless such money or property will be used solely to solicit the votes of the members in anelection to be held by the corporation;

(2) Used for any commercial purpose; or(3) Sold or purchased by any person. [1989 c.1010 § 168]


(1) Proposed Changes to the Model Act: None.

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(2) Effective Changes from Chapter 61 Provisions: This sectionprovides guidelines to determine whether the proposed use of themembership list is proper. It also provides protection to membersby requiring board approval of the sale of a membership list or itsuse for commercial purposes.

(3) Relationship to the Oregon Business Corporation Act: Thereis no parallel section.NOTE: The proposal omits Model Act § 16.20 (financial statements for members).

(REPORTS)

65.784 REPORT TO MEMBERS AND OTHER PERSONS OFINDEMNIFICATION

If a corporation indemnifies or advances expenses to a directorunder ORS 65.391 to 65.401 in connection with a proceeding by orin the right of the corporation, the corporation shall report the indemnification or advance in writing to:

(1) The members with or before the notice of the next meeting ofmembers; and

(2) Any person having the right to designate or appoint the director no later than 90 days after the first indemnification or advance.[1989 c.1010 § 169; 1991 c.231 § 13]


(1) Proposed Changes to the Model Act: See Official Commentto 1991 Legislative Amendment below.

(2) Effective Changes from Chapter 61 Provisions: This requiresa report to the members when there has been an indemnification oran advancement of expenses to a director. Current law does notrequire reporting this to members.



The purpose of the additional language is to afford notice, similarto that afforded members, to persons having designation or appointment rights in the event of indemnification or advance of expenses.

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65.787 ANNUAL REPORT

(1) Each domestic corporation, and each foreign corporation authorized to transact business in this state, shall by its anniversarydeliver to the Office of the Secretary of State for filing an annualreport that sets forth:

(a) The name of the corporation and the state or country underwhose law it is incorporated;

(b) The street address of the registered office and the name of theregistered agent at that office in this state;

(c) If the registered agent is changed, that the new registeredagent has consented to the appointment;

(d) The address including street and number and mailing addressif different from its principal office;

(e) The names and addresses of the president and secretary ofthe corporation;

(0 A brief description of the nature of the activities of thecorporation;

(g) Whether or not it has members;(h) If it is a domestic corporation, whether it is a public benefit,

mutual benefit or religious corporation;(i) If it is a foreign corporation, whether it would be public bene

fit, mutual benefit or religious corporation had it been incorporatedin this state;

(j) The federal employer identification number of the corporation; and

(k) Additional identifying information that the Secretary ofState may require by rule.

(2) The information contained on the annual report shall be current as of 30 days before the anniversary of the corporation.

(3) The Secretary of State shall mail the annual report form toany address shown for the corporation in the current records of theoffice. The failure of the corporation to receive the annual reportform from the Secretary of State shall not relieve the corporationof its duty to deliver an annual report to the office as required bythis section.

(4) If an annual report does not contain the information requiredby this section, the Secretary of State shall promptly notify the reporting domestic or foreign corporation in writing and return the

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report to it for correction. The domestic or foreign corporationmust correct the error within 45 days after the Secretary of Stategives such notice.

(5) A domestic or foreign corporation may deliver to the Officeof the Secretary of State for filing an amendment to the annualreport if a change in the information set forth in the annual reportoccurs after the report is delivered to the Office of the Secretary ofState for filing and before the next anniversary. This subsectionapplies only to a change that is not required to be made by anamendment to the articles of incorporation. The amendment to theannual report must set forth:

(a) The name of the corporation as shown on the records of theOffice of the Secretary of State; and

(b) The information as changed. [1989 c.1010 § 170]


(1) Proposed Changes to the Model Act: Subsection (1) waschanged to provide that the annual report shall be delivered by itsanniversary to the office for filing. Specifications regarding the address have also been changed to require street addresses of the registered office and street and mailing addresses of the principal office.Subsection (l)(c) was amended to require a change of registeredagent to include a statement that the new registered agent consentedto the appointment. There was an amendment of subsection (l)(e)to delete naming all directors, but specify the president and secretary. Subsection (l)(j) requiring disclosure of the federal employernumber was added. Subsection (l)(k) requiring additional information that the Secretary of State may require by rule was added.

Subsection (3) requires the Secretary of State to mail an annualreport form to the corporation's current address, but the corporation must file an annual report whether it receives the form or not.

Subsection (4) was amended to provide 45 days rather than 30days to correct an error.

Subsection (5) was added to allow an amended annual report tobe filed when changes are made after the annual report and beforethe next anniversary when the changes do not require an amendment to the articles of incorporation.

These changes were made to conform ORS 65.787, Model Act§ 16.22, to the provisions of ORS 60.787.

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(2) Effective Changes from Chapter 61 Provisions: See comments above.


MISCELLANEOUS

65.951 SHORT TITLE

ORS 65.001 to 65.787 and 65.951 to 65.967 shall be known andmay be cited as the Oregon Nonprofit Corporation Act. [1989c.l0l0 § 1]


(1) Proposed Changes to the Model Act: None.(2) Effective Changesjrom Chapter 61 Provisions: None, except

the word "Law" is changed to "Act."(3) Relationship to the Oregon Business Corporation Act: Paral

lels ORS 60.951.

65.954 RESERVATION OF POWER TO AMEND OR REPEAL

All or part of this chapter may be amended, repealed or modifiedat any time and all domestic and foreign corporations subject tothis chapter are governed by the amendment, repeal or modification. [1989 c.l0l0 § 2]


(1) Proposed Changes to the Model Act: The Model Act language is modified to conform to ORS Chapter 60, without substantive change.

(2) Effective Changes jrom Chapter 61 Provisions: There is nosubstantive change from existing law, but the language has beenconformed to the Business Corporation Act.


(4) Other Comments: While ORS 65.954 may not be necessary,it was included in accordance with Model Act § 1.02 to clearly address any lingering concern that a state cannot, without explicitlyreserving the right, apply later statutory changes to preexistingcorporations.

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65.957 ApPLICATION TO EXISTING DOMESTIC CORPORATIONS

(1) This chapter applies to all domestic corporations in existenceon October 3, 1989, that were incorporated under any general statute of this state providing for incorporation of nonprofit corporations if power to amend or repeal the statute under which thecorporation was incorporated was reserved.

(2) Without limitation as to any other corporations which maybe outside the scope of subsection (1) of this section, this chapterdoes not apply to the following:

(a) The Oregon State Bar and the Oregon State Bar Professional Liability Fund created under ORS chapter 9;

(b) The Oregon Resource and Technology Development Corporation created under ORS chapter 284;

(c) The State Accident Insurance Fund Corporation createdunder ORS chapter 656;

(d) The Oregon Insurance Guaranty Association and the OregonLife and Health Insurance Guaranty Association created underORS chapter 734; and

(e) The Oregon FAIR Plan Association and the Oregon MedicalInsurance Pool created under ORS chapter 735.

(3) A public benefit corporation that has less than three directorson October 3, 1989, shall comply with ORS 65.307 (1) by October3, 1990. [1989 c.l0l0 § 172]


(1) Proposed Changes to the Model Act: In subsection (1), therevisions to the Model Act correspond to the language of ORS60.957. Subsection (2) as added, expressly excludes certain quasipublic agencies. The list of agencies was prepared by the AttorneyGeneral. Subsection (3) allows a year's transition for a public benefit corporation to have three directors.

(2) Effective Changesfrom Chapter 61 Provisions: No comparable provision.

(3) Relationship to the Oregon Business Corporation Act: Subsection (1) is parallel to ORS 60.957.

(4) Other Comments: By reason of subsection (1), on the effective date of the Act all existing Oregon nonprofit corporations willfall into one of the following categories: religious corporations,

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public benefit corporations and mutual benefit corporations. SeeORS 65.001, Model Act § 1.40 for definitions. Pursuant to ORS65.787(l)(h), Model Act § 16.22(a)(7), each domestic nonprofit corporation must state in its annual report filed with the office of theSecretary of State whether it is a public benefit, mutual benefit orreligious corporation. A person signing a document to be filed withthe Secretary of State knowing it to be false in any material respectcommits the crime of falsely signing a document for filing. SeeORS 65.990, Model Act § 1.29. Pursuant to ORS 65.024(2), documents filed with the Office of the Secretary of State may be used asprima facie evidence of the facts stated therein. A domestic nonprofit corporation wishing to make the category into which it falls amatter of public record prior to the time for filing its next annualreport may do so by adopting and filing an amendment to its articles of incorporation pursuant to ORS 65.434, Model Act § 10.02.

65.961 ApPLICATION TO QUALIFIED FOREIGN CORPORATIONS

A foreign corporation authorized to engage in activities in hisstate on October 3, 1989, is subject to this chapter but is not required to apply for new authority to engage in activities under thischapter. [1989 c.1010 § 173]


(1) Proposed Changes to the Model Act: The revisions to theModel Act correspond to the language of ORS 60.961.

(2) Effective Changes/rom Chapter 61 Provisions: No comparable provision.

(3) Relationship to the Oregon Business Corporation Act: Theprovision is parallel to ORS 60.961.

(4) Other Comments: By reason of this provision, on the effective date of the Act all existing qualified foreign corporations will betreated as a corporation that would be public benefit, mutual benefitor religious had it been incorporated in this state. See, e.g., ORS65.751 to 65.757. Pursuant to ORS 65.787(l)(i), Model Act§ 16.22(a)(8), each qualified foreign corporation must state in its annual report into which of these three classes it would fall if it weredomestic. See Commentary to ORS 65.957.

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65.964 SAVING PROVISIONS

(1) Except as provided in subsections (2), (3) and (4) of this section, the repeal of a statute by chapter 1010, Oregon Laws 1989,does not affect:

(a) The operation of the statute or any action taken under itbefore its repeal;

(b) Any ratification, right, remedy, privilege, obligation or liability acquired, accrued or incurred under the statute before its repeal;

(c) Any violation of the statute, or any penalty, forfeiture or punishment incurred because of the violation, before its repeal; or

(d) Any proceeding, reorganization or dissolution commencedunder the statute before its repeal. The proceeding, reorganizationor dissolution may be completed in accordance with the statute as ifit had not been repealed.

(2) The provisions of ORS 65.387 to 65.414 shall apply to allindemnification made by a corporation after October 3, 1989, andall other actions regarding indemnification taken by or on behalf ofa corporation or by a court after October 3, 1989, including all indemnification made and other actions taken after October 3, 1989,with respect to claims that arose or matters that occurred prior toOctober 3, 1989, or pursuant to any provisions of any articles ofincorporation, bylaws, resolutions or agreements in effect prior toOctober 3, 1989.

(3) If a penalty or punishment imposed for violation of a statuterepealed by chapter 1010, Oregon Laws 1989, is reduced by thischapter, the penalty or punishment, if not already imposed, shall beimposed in accordance with this chapter.

(4) This chapter shall apply to any amendment to a corporation'sarticles of incorporation filed after October 3, 1989, even if memberapproval of such amendment occurred prior to October 3, 1989.

(5) Except as specifically provided in this chapter, nothing in thischapter shall affect any powers the Attorney General may haveunder other statutes or common law. [1989 c.1010 § 174]


(1) Proposed Changes to the Model Act: The revisions to theModel Act correspond to the language of ORS 60.964. Model ActSubsection (a)(5) has been deleted, in part because, with respect toactions taken by members or directors, it is a subcategory of actions

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covered by ORS 65.964(1)(a), and in part because it conflicts withORS 65.964(4) which was added to be parallel to ORS 60.964.ORS 65.964(5) is added to make clear that the bill is not intended toaffect the Attorney General's powers.

(2) Effective Changes from Chapter 61 Provisions: No comparable provision.

(3) Relationship to the Oregon Business Corporation Act: Theprovision is parallel to ORS 60.964.

65.967 SEVERABILITY

If any provision of this chapter or its application to any person orcircumstance is held invalid by a court of competent jurisdiction,the invalidity does not affect other provisions or applications of thischapter that can be given effect without the invalid provision orapplication, and to this end the provisions of this chapter are severable. [1989 c.1010 § 175]


(1) Proposed Changes to the Model Act: None.(2) Effective Changes from Chapter 61 Provisions: No compara

ble provision.(3) Relationship to the Oregon Business Corporation Act: The

provision is parallel to ORS 60.971.

PENALTY

65.990 PENALTY FOR SIGNING FALSE DOCUMENT

(1) A person commits the crime of falsely signing a document forfiling if the person signs a document knowing it is false in any material respect with intent that the document be delivered to the Officeof the Secretary of State for filing.

(2) Violation of subsection (1) of this section is a Class B misdemeanor. [1989 c.1010 §§ 12, 171]


(COMMENTARY TO BILL § 12)

(l) Proposed Changes to the Model Act: The Model Act Ian.,

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guage has been changed to parallel ORS Chapter 60 and Oregon'scriminal code but there is no substantive change.

(2) Effective Changes from Chapter 61 Provisions: This sectionadds a penalty which does not exist in present law.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.990(1). Legislative counsel dividedModel Act § 1.29 into Bill §§ 12 and 171. Later, both bill sectionswere incorporated into ORS 65.990.

(COMMENTARY TO BILL § 171)

(1) Proposed Changes to the Model Act: The proposal fills in theblanks in the Model Act to conform to ORS 60.990(1).

(2) Effective Changes from Chapter 61 Provisions: ORS Chapter 61 has no counterpart. See comment to ORS 65.990.

(3) Relationship to the Oregon Business Corporation Act: Theproposal parallels ORS 60.990. Legislative counsel divided ModelAct § 1.29 into Bill §§ 12 and 171. Later, both bill sections wereincorporated into ORS 65.990.

(4) Other Comments: In determining what penalty would beappropriate to this offense, the Task Force followed the provisionsof ORS 60.990 which in turn are consistent with ORS 162.085(which makes an unsworn falsification to a public official in order toobtain some benefit a Class B misdemeanor). A Class B misdemeanor carries a risk of $1,000 for individuals (ORS 161.635) and$2,500 for corporations (ORS 161.655). Misdemeanors, of anyclass, may also entail jail terms of up to one year (ORS 161.545).

While the Task Force believes that classifying the offense as a"violation" under ORS 161.565, carrying an individual fine of up to$250 (corporate $500), no potential jail time and no civil disabilities,would be the more appropriate, the Class B misdemeanor was retained for consistency with ORS Chapter 60 and ORS 162.085, andwith recognition that judicial discretion can be used to achieve aproper result. See ORS 161.565(2).

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INDEXNONPROFIT CORPORATIONS(Generally), 65.001 et seq.

See also CHARITABLE ANDBENEVOLENT ORGANIZATIONSin ORS general index

Actions and proceedingsAttorney General, notice of proceeding

commencement, 65.040Creditor actions, against members,

65.157Derivative suits, 65.174Liability, directors and officers, 65.367,

65.369Meeting, court order, 65.038

Activities and Purposes, 65.074Agent, registered, see Registered office

and agent, this topicAnnual report

(Generally), 65.787Filing fee, 65.007Filing requirement, 65.004

Annuity agreements, educationinstitutions, see ANNUITIES in ORSgeneral index

Articles of dissolution, 65.631Articles of incorporation

(Generally), 65.047Amendment

(Generally), 65.431 et seq.Articles of amendment, 65.447Authority, 65.431Class voting by members, 65.441Court order, amendment pursuant

to, 65.454Directors, amendment by, 65.434,

65.437Effect, 65.457Members, amendment by, 65.437Restated articles of incorporation,

65.451Filing fees, 65.007

Assessments, member liability, 65.154

Asset sale(Generally), 65.531Dissolution, 65.674Other than regular course of activities,

65.534Attorney General

Dissolution, notices to, 65.627Meeting, court order, petition, 65.038Notice, commencement of

proceedings, 65.040Authority, challenge, remedy, 65.084Board of directors

(Generally), 65.301 et seq.Appointment, 65.311Committees, 65.354Compensation, 65.335Designation and appointment, 65.311Duties, 65.301Election, 65.311Meetings, 65.337, 65.341, 65.344,

65.347,65.351Number of directors, 65.307Qualifications, 65.304Removal, 65.324, 65.327, 65.331Requirements for, 65.301Resignation, 65.321Terms, 65.314, 65.317Vacancy on board, 65.334

Bylaws(Generally), 65.061Amendment(Generally), 65.461 et seq.

Approval by third persons, 65.467Directors and members, amendment

by, 65.464Directors, amendment by, 65.461

Emergency bylaws and powers, 65.064Cemeteries and crematories, see

CEMETERIES in ORS general indexCertificates and certification

Certificate of existence ofauthorizations, 65.027

Challenge of corporate authority, 65.084Claims against

Known claims, 65.641Liability, see Liability, this topicUnknown claims, 65.644

Committees, 65.354Construction of laws, 65.967Contracts, rights of officers, 65.384Corporation sole, 65.067Court order, meetings, 65.038Creditors actions against members,

65.157

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DecreesDissolution, 65.671Foreign corporation, revocation of

authority, 65.757Definitions, 65.001Delegates, 65.177Derivative suits, 65.174Directors and officers

(Generally), 65.301 et seq.Electing, voting, other methods, 65.251Indemnification, see Indemnification,

this topicLiability, 65.367, 65.369Officers

Contract rights, officers, 65.384Duties and authority, 65.374Required, 65.371Resignation and removal, 65.381Standards of conduct, 65.377

Standards of conduct(Generally), 65.357 et seq.Conflict of interest, director, 65.361General standards, 65.357Loans or guarantees, public benefit

and religious corporations, 65.364Dissolution

Administrative(Generally), 65.647Appeal, denial of reinstatement,

65.657Grounds, 65.647Procedure, 65.651Reinstatement following, 65.654

Asset disposition, 65.674Claims against corporation, see Oaims

agmnst, this topicJudicial

(Generally), 65.661 et seq.Decree, 65.671Grounds, 65.661Procedure, 65.664Receivership or custodianship,

65.667Voluntary

(Generally), 65.621 et seq.Articles of dissolution, 65.631Directors, members and third

persons, dissolution by, 65.624Effect, 65.637Notice to Attorney General, 65.627Revocation, 65.634

DistributionsAuthorized, 65.554Prohibited, 65.551

Documents, see Records and recording,this topic

Dues, members liability, 65.154Educational institution annuity

agreements, see ANNUITIES in ORSgeneral index

Emergency bylaws and powers, 65.064Emergency powers, 65.081Evidence, certified copies, 65.024False document, penalty for signing,

65.990

Fees, members liability, 65.154Filing, see Records and recording, this

topicFiling fees, business registry documents,

65.007Foreign

(Generally), 65.701 et seq.Application of laws, 65.961Authority to transact business

(Generally), 65.701 et seq.Application for authority, 65.707,

65.711Effect of authority, 65.714Transacting business without

authority, 65.704Registered office and agent, 65.721,

65.724,65.727Revocation of authority

Administrative, 65.737, 65.741,65.744, 65.747

Judicial revocation, 65.751, 65.754,65.757

Service, 65.731Withdrawal, 65.734

Forms, documents required filed, 65.016General powers, 65.077Gifts

Cemeteries, land for, 65.855Devises or bequests, effect of merger,

65.501Irreducible fund, creation, 65.860

Incorporation(Generally), 65.044 et seq.Articles, see Articles of incorporation,

this topic

Beginning of corporate existence,65.051

Incorporators, 65.044Liability, preincorporation

transactions, 65.054Indemnification

Advance for expenses, 65.397Applicat~on oflaws, 65.414Authority to indemnify, 65.391Court-ordered, 65.401Definitions, 65.387Determination and authorization,

65.404Insurance, 65.411Mandatory indemnification, 65.394Officers, employees and agents,

indemnification of, 65.407Report to members, 65.784

InsuranceIndemnification, 65.411

Laws, applicationExisting corporations, application,

65.957Foreign corporations, application,

65.961Reservation of power to amend or

appeal, 65.954Saving provisions, 65.964Severability, 65.967

LiabilityPreincorporation transactions, 65.054Third parties, liability of members to,

65.151Torts, direction and officers, 65.369

Loans, benefit of director or officer,public benefit corporations, 65.364

Meetings(Generally), 65.210 et seq.Action by written ballot, 65.222Actions without meeting, 65.211Adjournment, 65.234Annual and regular, 65.201Board of directors, 65.337, 65.341,

65.344,65.347,65.351Court-ordered, 65.207Date, record, 65.221Delegates, conducting meetings of,

65.177Notice, 65.214, 65.217Order, court, 65.038Quorum, 65.241

Special, 65.204

Members and membersbips(Generally), 65.131 et seq.Admission, 65.131, 65.134, 65.137Consideration, none required for

admission, 65.134Dues, assessments and fees, members

liability, 65.154Members not required, 65.137Resignation and termination

Acquiring memberships, 65.171Resignation, 65.164Termination, 65.167

Rights and obligations of members(Generally), 65.144Differences in rights, 65.144Liability to third parties, 65.151Transfers, 65.147

Merger(Generally), 65.481 et seq.Action on plan, 65.487Approval of plan, 65.481Articles of merger, 65.491Business corporation, merger with,

65.504Effect, 65.494, 65.501Foreign Corporation, merger with,

65.497Limitations, mergers by public benefit

or religious corporations, 65.484Names

(Generally), 65.094Filing fees, 65.007Foreign corporation, 65.717Registered, 65.101Reserved, 65.097

Notices, 65.034

Office, registered, see Registered officeand agent, this topic

Officers, see Directors and officers, thistopic

Organization of corporation, 65.057Penmty, false document, signing, 65.990Powers

(Generally), 65.077Emergency, 65.081

Private foundations, activities, 65.036Proxies, 65.231

Purposes and activities, 65.074

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Records and recordingCorporate records, 65.771False document, signing, penalty,

65.990Filings

Certificate of existence orauthorization, 65.027

Correcting filed document, 65.014Evidence, certified copy, filed

document or certificate, 65.024Fees, filing, service and copying,

65.007Forms, 65.016Requirements, 65.004Secretary of State, duty, 65.017,

65.021Time and date of document, effective,

65.011Inspection of records

(Generally), 65.774 et seqCourt-ordered inspection, 65.781Scope of inspection, 65.777

Membership list, limitations on use,65.782

Registered(Generally), 65.111Change, 65.114

Registered office and agentForeign corporations, 65.724, 65.727Resignation, registered agent, 65.117Service on corporation, 65.121

Religious corporationsCorporation sole, 65.067Inconsistent law provisions, controlling

doctrine or practice, 65.042Limitations on Mergers, 65.484Memberships, acquiring for value,

65.171Reports

Filing fees, 65.007

Indemnification, report to members,65.784

Sale of assets(Generally),65.531Other than regular course of activities,

65.534

Secretary of StateFilings, duties, 65.017, 65.021Powers, 65.031

ServiceCorporation, 65.121Foreign corporation, 65.731

Severability of laws, 65.967Sole, corporation sole, 65.067

Solicitation, charity funds, seeCHARITABLE ANDBENEVOLENT ORGANIZATIONSin ORS general index

Third parties, members liability to,65.151

Title of act, 65.951Tort liability, directors and officers,

65.369Unemployment compensation, see

UNEMPLOYMENTCOMPENSATION in ORS generalindex

Violations, penalty, 65.0990Voting

(Generally), 65.224Action by written ballot, 65.222Agreements, 65.254Corporate acceptance of votes, 65.237Cumulative voting, 65.247Entitlement of members, 65.227Proxies, 65.231Requirements, 65.244Voting agreements, 65.254

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